This chapter provides an overview of scholarship on the political economy of skill formation. Skill formation includes, but goes beyond, the acquisition of human capital in the formal education system by taking into account the formation of skills in a workplace context. Therefore, the interplay between the education and training system, labor market institutions and industrial relations is in focus, as they jointly affect the political economy of skill formation. The chapter starts with the classical perspective of human capital theory and its basic distinction between general and specific skills. In the next step, I discuss how institutionalist approaches from the 1980s and 1990s have enriched the picture by pointing to the impact of labor market institutions and industrial relations as factors influencing decisions about skill formation. Subsequently, I lay out how the topic of skill formation gained significant prominence in the context of the Varieties of Capitalism debate, starting in the early 2000s. The final section of the chapter reviews more recent contributions, discussing the implications of the transition toward the knowledge economy, the complex association between skill formation, inequality and social policies as well as the expansion of scholarship on the political economy of skill formation to world regions beyond the OECD world. © The Editor and Contributors Severally 2025.
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