The Impact of Training on Productivity and Wages: Evidence from British Panel Data

25 Pages Posted: 27 Jul 2006

See all articles by Lorraine Dearden

Lorraine Dearden

Institute for Fiscal Studies (IFS)

Howard Reed

Institute for Fiscal Studies (IFS); University College London - Centre for Social and Economic Research on the Global Environment (CSERGE)

John Van Reenen

London School of Economics - Centre for Economic Performance (CEP); Stanford Graduate School of Business; Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR)

Abstract

It is standard in the literature on training to use wages as a sufficient statistic for productivity. This paper examines the effects of work-related training on direct measures of productivity. Using a new panel of British industries 1983-96 and a variety of estimation techniques we find that work-related training is associated with significantly higher productivity. A 1% point increase in training is associated with an increase in value added per hour of about 0.6% and an increase in hourly wages of about 0.3%. We also show evidence using individual-level data sets that is suggestive of training externalities.

Suggested Citation

Dearden, Lorraine and Reed, Howard and Van Reenen, John Michael, The Impact of Training on Productivity and Wages: Evidence from British Panel Data. Oxford Bulletin of Economics and Statistics, Vol. 68, No. 4, pp. 397-421, August 2006. Available at SSRN: https://ssrn.com/abstract=920949 or http://dx.doi.org/10.1111/j.1468-0084.2006.00170.x

Lorraine Dearden (Contact Author)

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

Howard Reed

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

University College London - Centre for Social and Economic Research on the Global Environment (CSERGE)

Gower Street
London WC1E 6BT, Norwich
United Kingdom

John Michael Van Reenen

London School of Economics - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 6976 (Phone)
+44 20 7955 6848 (Fax)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom
+44 20 7240 6740 (Phone)
+44 20 7240 6136 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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