The Returns to Continuous Training in Germany: New Evidence from Propensity Score Matching Estimators

Abstract

The present paper examines the wage effects of continuous training programs using individual-level data from the German Socio Economic Panel (GSOEP). In order to account for selectivity in training participation we estimate average treatment effects (ATE and ATT) of general and firm-specific continuous training programs using several state-of-the-art propensity score matching (PSM) estimators. Additionally, we also apply a combined matching difference-indifferences (MDiD) estimator to account for unobserved individual characteristics (e.g. motivation, ability). While the estimated ATE and ATT for general training are significant ranging between about 4 and 7.5%, the corresponding wage effects of firm-specific training are mostly insignificant. Using the more appropriate MDiD estimator, however, we find a more precise and highly significant wage effect of about 5 to 6%, though only for general training and not for firm-specific training. These results are consistent with standard human capital theory insofar as general training is associated with larger wage increases than firm-specific training. Furthermore, we conclude that firms may intend to use specific training to adjust to new job requirements, while career-relevant changes may be conditioned to general training.

Keywords: Continuous training, wage effect, average treatment effect, selectivity bias, propensity score matching estimators, combined matching difference-in-differences estimator

JEL Classification: C21, J24, J31, M53