Overall aims of the paper 1. To examine the relative benefits of formal versus informal on-the-job training Returns and their source Labour market Flexibility To model wage formation and identify the sources of wage grow th 3. To create a framework where the implications of welfare policies can be analysed in a life-cycle context with all their dynamic implicationsOverall aims of the paper 1. To examine the relative benefits of formal versus informal on-the-job training. • Returns and their source • Labour market Flexibility 2. To model wage formation and identify the sources of wage growth. 3. To create a framework where the implications of welfare policies can be analysed in a life-cycle context with all their dynamic implications