Market Imperfections and Firm-Sponsored Training
Department of Economic and Social Science, Marche Polytechnic University; SHERPPA - Ghent University; Tilburg University - Center for Economic Research (CentER); Institute for the Study of Labor (IZA); Catholic University of Louvain (UCL) - School of Economic and Social Research (IRES)
Jan C. Van Ours
Tilburg University - Department of Economics; University of Melbourne - Department of Economics
June 2, 2010
CentER Discussion Paper Series No. 2010-57
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.
Number of Pages in PDF File: 24
Keywords: firm-sponsored training, labor market frictions, product market competition, matched worker-firm data
JEL Classification: D43, J24, J42, L22, M53
Date posted: June 9, 2010
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