The Structure of Wages and Investment in General Training.

In the standard model of human capital with perfect labor markets, workers pay for general training. When labor market feictions compress the structure of wages, firms may invest in the general skills of their employees. The reason is that the d istortion in the wage structure turns "technologically"general skills into "specific" skills. Labor market frictions and institutions, such as minimum wages and union wage setting, are crucial in shaping the wage structure, and thus have an important impa ct on training. Our results suggest that the more frictional and regulated labor markets in Europe and Japan may generate more firm-sponsored general training than the U.S.