Training and Productivity: Evidence for Us Manufacturing Industries

Abstract

We use an industry level dataset to examine the role of formal training programs in productivity growth. Because there is disagreement over the technology that converts training into new human capital, we test a number of hypotheses regarding this technology: We find evidence for positive and decreasing effects of on-the-job training in human capital accumulation, and therefore productivity. In the cross section, training is more effective in industries with higher human capital. These effects are quantitatively important, and increase substantially when the endogeneity of training decisions is addressed. Off-the-job training on the other hand has no effects on industrial productivity.

Keywords: training, labor productivity