By allowing firms to invest in their workers' human capital, this
paper extends the traditional analysis of firing costs with respect
to two points, both of them positive in terms of welfare. On the one
hand, firing restrictions reduce turnover, thereby enhancing
incentives to provide training.
On the other hand, training gives firms the opportunity to lower the
costs of firing restrictions since well-trained workers are less
likely to be fired. In this way the negative effects of firing costs
on firm profitability and workers' job-finding rates are reduced.