Job flows and unemployment in an equilibrium unemployment model with firm-specific skill training

We introduce productivity enhancing firm-specific skill training into the labour search model in which the firm-specific skill training intensity and the job destruction rate are endogenously determined. It is shown that the higher the intensity of such training, the lower the rates of unemployment, job creation and job destruction. The paper's model provides a theoretical framework to understand the often mentioned peculiarity of the Japanese labour market; prevalently low rates of unemployment, job creation and job destruction in Japan are due to its training system which promotes workers to acquire firm-specific skills.