Ebook The Impact of Training on Productivity: Evidence from a Large Panel of Firms
Human capital is widely acknowledged as a key factor for economic performance at both the micro and macro level. Despite the fact that a large fraction of human capital accumulation takes place after the entry into the labor market, most of the existing literature that investigates the returns to investment in human capital has focused on education, due to measurement problems and data availability. Relatively little evidence is available, instead, on the accumulation of human capital through the lifelong training of workers and, more specifically, on the effects of training on productivity.
A number of studies have tried to fill this gap by analysing the impact of training on productivity using firm-level data. However, this literature does not provide a consistent picture, as the lack of longitudinal data has generally made it difficult to control for unobserved heterogeneity and endogeneity of training (e.g. Bartel, 1994, Bishop, 1994, Black and Lynch, 1996, Barrett and O’Connell, 2001). Some recent studies have tackled this problem by focusing on panel data at industry-level (e.g. Dearden et al., 2006, Conti, 2005). This approach, however, does not allow to estimate the private returns to training, as analyses based on industry-level data also capture spillover effects between firms. There exists a recent literature that investigates the effects of training on productivity using firm-level panel data, but it is generally hampered either by the specificity of the sample (e.g. Almeida and Carneiro, 2006), or by the limited number of observations in the sectional dimension (Ballot et al., 2006; Zwick, 2005, 2006) or in the time dimension (Black and Lynch, 2001).
This paper investigates the effects of training on productivity using a unique nationally representative sample of Italian firms in the period 2002 to 2005. Our paper contributes to the existing literature in several ways. Our study is the first in the literature to be based on a large and nationally representative panel data set at firm-level.
The availability of longitudinal information on training and productivity allows us to deal with both unobserved heterogeneity and endogeneity of training, using a variety of panel estimation techniques. In addition, firm-level data on training and direct measures of productivity allow us to estimate the private returns to training for employers, while netting out the possible spillover effects that may lead to over-estimation when using industry-level data.
Second, we examine whether training has different returns for employers and employees, by comparing the effects of training on direct measures of labor productivity with the results obtained from the corresponding wage equations. We also check the robustness of the results in the baseline specification by allowing for different types of labor, and by focusing on sub-samples defined on the basis of firms characteristics (size, industry, region). In addition, we are able to account for the duration of training by constructing an alternative indicator of training intensity, the average number of days of training per worker, and comparing its effects on productivity with those of the standard indicator of training intensity generally used in the literature.
Third, Italy provides a particularly interesting case study for at least two reasons. On the one hand, it is one of the countries with the lowest incidence of on-the-job training in Europe (Bassanini et al., 2005). It is therefore interesting to assess to what extent this feature can affect the relationship between firms’ training and productivity, while obtaining an indication of the efficiency costs implied by sub-optimal investment in training. On the other hand, the Italian labor market is known to be characterised by severe rigidities. Comparing the effect of training on productivity and wages allows to assess the effect of labor market rigidities on how the returns to training are shared between the firm and the workers.
Download
PDF Ebook The Impact of Training on Productivity: Evidence from a Large Panel of Firms
Posted in :
