Market Imperfections and Firm-Sponsored Training

25 Pages Posted: 29 Jun 2010

See all articles by Matteo Picchio

Matteo Picchio

Marche Polytechnic University - Department of Economic and Social Science; IZA Institute of Labor Economics; SHERPPA - Ghent University

Jan C. van Ours

Tilburg University - Department of Economics; University of Melbourne - Department of Economics

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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, product market competition, matched worker-firm data

JEL Classification: D43, J24, J42, L22, M53

Suggested Citation

Picchio, Matteo and van Ours, Jan C., Market Imperfections and Firm-Sponsored Training. IZA Discussion Paper No. 4988. Available at SSRN:

Matteo Picchio (Contact Author)

Marche Polytechnic University - Department of Economic and Social Science ( email )

Piazzale Martelli, 8
60121 Ancona
+39 071 220 7176 (Phone)


IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072

SHERPPA - Ghent University ( email )

Tweekerkenstraat 2
Ghent, B-9000

Jan C. Van Ours

Tilburg University - Department of Economics ( email )

P.O. Box 90153
Tilburg, 5000 LE
+31 13 466 2880 (Phone)
+31 13 466 3042 (Fax)

University of Melbourne - Department of Economics ( email )

Melbourne, 3010

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