A Quality-adjusted specification of labor is suggested which allow firms training to effect labor efficiency. To assess the cost and productivity effects, this specification is integrated into a flexible neoclassical cost function.

Investigating the robustness of the skill-biased technical change hypothesis, this analysis incorporates two novel features. First, effective labor is modeled as the product of a quantity measure - number of employees with a given level of education - and a quality index, depending on, i.a.,...