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The return to firm investment in human capital

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Author Info
Rita Almeida
Pedro Carneiro () (Institute for Fiscal Studies and University College London)

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Abstract

In this paper we estimate the rate of return to firm investments in human capital in the form of formal job training. We use a panel of large firms withun usually detailed information on the duration of training, the direct costs of training, and several firm characteristics such as their output,workforce characteristics and capital stock. Our estimates of the return to training vary substantially across firms. On average it is - 7% for firms not providing training and 24% for those providing training. Formal job training is a good investment for many firms and the economy, possibly yielding higher returns than either investments in physical capitalor investments in schooling. In spite of this, observed amounts of formal training are very small.

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Publisher Info
Paper provided by Centre for Microdata Methods and Practice, Institute for Fiscal Studies in its series CeMMAP working papers with number CWP21/05.

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Length: 31 pp.
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:ifs:cemmap:21/05

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Related research
Keywords: On-the-Job Training; Panel Data; Production Function; Rate of Return;

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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  5. Arulampalam, S.W. & Booth, A. & Elias, P., 1995. "Work-Related Training and Earnings Growth for Young Men in Britain," The Warwick Economics Research Paper Series (TWERPS) 440, University of Warwick, Department of Economics.
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  7. Jacob Mincer, 1989. "Job Training: Costs, Returns, and Wage Profiles," NBER Working Papers 3208, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Edwin Leuven & Hessel Oosterbeek, 2004. "Evaluating the Effect of Tax Deductions on Training," Journal of Labor Economics, University of Chicago Press, vol. 22(2), pages 461-488, April. [Downloadable!]
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  17. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor and Francis Journals, vol. 19(3), pages 321-340. [Downloadable!] (restricted)
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  18. Alan Barrett & Philip J. O'Connell, 2001. "Does training generally work? The returns to in-company training," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 54(3), pages 647-662, April.
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  19. Harley Frazis & Mark A. Loewenstein, 2005. "Reexamining the Returns to Training: Functional Form, Magnitude, and Interpretation," Journal of Human Resources, University of Wisconsin Press, vol. 40(2). [Downloadable!] (restricted)
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  25. Daron Acemoglu & Jörn-Steffen Pischke, 1998. "Why Do Firms Train? Theory And Evidence," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 78-118, February. [Downloadable!] (restricted)
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  26. Carneiro, Pedro & Hansen, Karsten T. & Heckman, James J., 2003. "Estimating Distributions of Treatment Effects with an Application to the Returns to Schooling and Measurement of the Effects of Uncertainty on College Choice," IZA Discussion Papers 767, Institute for the Study of Labor (IZA). [Downloadable!]
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  27. Andrea Bassanini & Alison Booth & Giorgio Brunello & Maria De Paola & Edwin Leuven, 2005. "Workplace Training in Europe," IZA Discussion Papers 1640, Institute for the Study of Labor (IZA). [Downloadable!]
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mika Maliranta & Rita Asplund, 2007. "Training and Hiring Strategies to Improve Firm Performance," Discussion Papers 1105, The Research Institute of the Finnish Economy. [Downloadable!]
  2. Benoît Mahy & Mélanie Volral, 2008. "The effect of quantitative and qualitative training on labour demand in Belgium: a monopolistic competition approach," Economics of Education Working Paper Series 0021, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
  3. Martinsson, Gustav, 2008. "Firm Collateral and the Cyclicality of Knowledge Intensity," Working Paper Series in Economics and Institutions of Innovation 134, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies. [Downloadable!]
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This page was last updated on 2009-10-31.

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