Competence, knowledge, and the labour market: the role of complementarities

This paper develops a theoretical analysis of training regimes as outcomes of a complementarity between organizational and institutional factors that determine firms' and workers' incentives as regards skills. Specifically, the paper proposes that, on the one hand, knowledge embeddedness within firms is the determinant of firms' preferences concerning training, while, on the other, labor market institutionalization provides the framework for workers' preferences. Applying a criterion of coherence between firm and worker incentives, two stable configurations are singled out. The former is shown to correspond to the Japanese model of training, while the latter conforms more to the German experience.