Working Paper: CEPR ID: DP7881
Authors: Matteo Picchio; Jan C. van Ours
Abstract: Recent human capital theories predict that labor market frictions and product market competition influence firm-sponsored training. Using matched worker-firm data from Dutch manufacturing, our paper empirically assesses the validity of these predictions. We find that a decrease in labor market frictions significantly reduces firms' training expenditures. Instead, product market competition does not have an effect on firm-sponsored training. We conclude that increasing competition through international integration and globalization does not pose a threat to investments in on-the-job training. An increase in labor market flexibility may reduce incentives of firms to invest in training, but the magnitude of this effect is small.
Keywords: firm-sponsored training; labor market frictions; matched worker-firm data; product market competition
JEL Codes: D43; J24; J42; L22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Decrease in labor market frictions (J69) | Decrease in firms' training expenditures (M53) |
| Product market competition (L13) | Firm-sponsored training (M53) |