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The impact of training on productivity and wages: evidence from British panel data

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Author Info
Lorraine Dearden () (Institute for Fiscal Studies and Bedford Group, Institute of Education, University of London)
Howard Reed (Institute for Fiscal Studies)
John Van Reenen

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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 1983-1996 and a variety of estimation techniques we find that work-related training is associated with significantly higher productivity. A one percentage 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 datasets that is suggestive of training externalities.

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Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W05/16.

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Length: 39 pp.
Date of creation: Aug 2005
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Handle: RePEc:ifs:ifsewp:05/16

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Related research
Keywords: Productivity; training; wages; panel data;

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Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
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

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References listed on IDEAS
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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. Budria, Santiago & Pereira, Pedro T., 2008. "The Contribution of Vocational Training to Employment, Job-Related Skills and Productivity: Evidence from Madeira Island," IZA Discussion Papers 3462, Institute for the Study of Labor (IZA). [Downloadable!]
  2. W. Stanley Siebert & Nick Zubanov, 2009. "Management economics in a large UK retailer," CPB Discussion Papers 125, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  3. Mohrenweiser, Jens & Zwick, Thomas, 2008. "Why Do Firms Train Apprentices? The Net Cost Puzzle Reconsidered," ZEW Discussion Papers 08-019, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
    Other versions:
  4. Spyros Arvanitis & Tobias Stucki, 2008. "Training Propensity of Start-ups in Switzerland - A Study Based on Data for the Start-up Cohort 1996-97," Economics of Education Working Paper Series 0035, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
    Other versions:
  5. Gielen, A. C., 2007. "Performance Pay, Training and Labor Mobility," Discussion Paper 2007-48, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  6. Johannes Van Biesebroeck, 2007. "Wage and Productivity Premiums in Sub-Saharan Africa," NBER Working Papers 13306, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Heinz Hollenstein & Tobias Stucki, 2008. "The Impact of ICT Usage, Workplace Organisation and Human Capital on the Provision of Apprenticeship Training : A Firm-level Analysis Based on Swiss Panel Data," KOF Working papers 08-205, KOF Swiss Economic Institute, ETH Zurich. [Downloadable!]
  8. Jozef Konings & Stijn Vanormelingen, 2009. "The Impact of Training on Productivity and Wages: Firm Level Evidence," LICOS Discussion Papers 24409, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
  9. Massimiliano Mazzanti & Susanna Mancinelli, 2007. "SME Performance, Innovation and Networking Evidence on Complementarities for a Local Economic System," Working Papers 2007.50, Fondazione Eni Enrico Mattei. [Downloadable!]
  10. 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!]
  11. Siebert, W. Stanley & Zubanov, Nikolay, 2008. "Management Economics in a Large Retail Organization," IZA Discussion Papers 3645, Institute for the Study of Labor (IZA). [Downloadable!]
  12. Mika Maliranta & Rita Asplund, 2007. "Training and Hiring Strategies to Improve Firm Performance," Discussion Papers 1105, The Research Institute of the Finnish Economy. [Downloadable!]
  13. Addison, John T. & Belfield, Clive R., 2008. "Unions, Training, and Firm Performance," IZA Discussion Papers 3294, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  14. Spyros Arvanitis, 2008. "Are Firm Innovativeness and Firm Age Relevant for the Supply of Vocational Training? – A Study Based on Swiss Micro Data," Economics of Education Working Paper Series 0036, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
    Other versions:
  15. Harald U. Pfeifer, 2008. "Train to gain – The benefits of employee-financed training in Germany," Economics of Education Working Paper Series 0037, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
  16. Jones, Melanie K. & Jones, Richard J. & Latreille, Paul L. & Sloane, Peter J., 2008. "Training, Job Satisfaction and Workplace Performance in Britain: Evidence from WERS 2004," IZA Discussion Papers 3677, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  17. Héctor Sala & José I. Silva, 2009. "Flexibility at the margin and labour market volatility: The case of Spain," Investigaciones Economicas, Fundación SEPI, vol. 33(2), pages 145-178, May. [Downloadable!]
  18. Renuka Metcalfe & Peter J. Sloane, 2007. "Human Capital Spillovers and Economic Performance in the Workplace in 2004: Some British Evidence," IZA Discussion Papers 2774, Institute for the Study of Labor (IZA). [Downloadable!]
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