Employment protection affects labour market outcomes and hence the incentive to acquire skills. Using a matching model with two education levels in which workers decide ex-ante on their skill formation, it is shown that employment protection can raise the fraction of skilled workers. This will be the case if workers obtain a sufficiently large fraction of the rent created by skill formation. Furthermore, it will be shown that high-skilled workers face shorter unemployment duration and lower dismissal probabilities.
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Find related papers by JEL classification: J68 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Public Policy J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
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