Do Training Funds Raise the Pace of Training? The Case of Mauritius
AbstractMany developing countries have tried to increase firm provision of training by providing subsidies funded by taxes proportional to the firmâ€™s wage bill.� These training funds, however, may backfire if the adverse effect of the tax on training incentives outweighs the positive effects of the subsidy.� We show that the value of these training funds depends critically on the extent to which firms are liquidity constrained.� If the effective firm discount rate is low, the disincentives outweigh the benefits.� Using an administrative dataset on the Mauritius training fund, we show that larger, high-wage and more capital intensive firms are the most likely to offer to training without the subsidy, but that the subsidy creates an increased incentives for small firms to train.� As a result, the largest firms pay more in taxes than they gain in subsidies while the smallest firms receive more benefits than they pay in taxes.� Consequently, the program shifts net training investments away from the firms that would normally have the greatest return from training and toward smaller firms that would normally have the lowest return from training.� It is doubtful that the program actually raises the incidence of training overall.�
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 35729.
Date of creation: 19 Dec 2012
Date of revision:
Contact details of provider:
Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
More information through EDIRC
training; General Skills; firm-specific skills; training fund; externality; cross-subsidy; tax;
Other versions of this item:
- Oluyemisi Kuku & Peter F. Orazem & Sawkut Rojid & Milan Vodopivec, 2013. "Do Training Funds Raise the Pace of Training? The Case of Mauritius," Diversity, Technology, and Innovation for Operational Competitiveness: Proceedings of the 2013 International Conference on Technology Innovation and Industrial Management, ToKnowPress.
- M53 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Training
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
- O2 - Economic Development, Technological Change, and Growth - - Development Planning and Policy
- O55 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Africa
This paper has been announced in the following NEP Reports:
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.:
- David Card & Jochen Kluve & Andrea Weber, 2009.
"Active Labor Market Policy Evaluations: A Meta-analysis,"
CESifo Working Paper Series
2570, CESifo Group Munich.
- David Card & Jochen Kluve & Andrea Weber, 2010. "Active Labour Market Policy Evaluations: A Meta-Analysis," Economic Journal, Royal Economic Society, vol. 120(548), pages F452-F477, November.
- David Card & Jochen Kluve & Andrea Weber, 2010. "Active Labor Market Policy Evaluations: A Meta-Analysis," NBER Working Papers 16173, National Bureau of Economic Research, Inc.
- Card, David & Kluve, Jochen & Weber, Andrea, 2009. "Active Labor Market Policy Evaluations: A Meta-Analysis," IZA Discussion Papers 4002, Institute for the Study of Labor (IZA).
- David Card & Jochen Kluve & Andrea Weber, 2009. "Active Labor Market Policy Evaluations – A Meta-analysis," Ruhr Economic Papers 0086, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
- David E. Card & Jochen Kluve & Andrea Weber, 2009. "Active Labor Market Policy Evaluations: A Meta-analysis," NRN working papers 2009-02, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
- Daron Acemoglu & Jorn-Steffen Pischke, 1996.
"Why Do Firms Train? Theory and Evidence,"
NBER Working Papers
5605, National Bureau of Economic Research, Inc.
- Acemoglu, Daron & Pischke, Jörn-Steffen, 1996. "Why do Firms Train? Theory and Evidence," CEPR Discussion Papers 1460, C.E.P.R. Discussion Papers.
- Acemoglu, D. & Pischki, J.S., 1996. "Why Do Firms Train? Theory and Evidence," Working papers 96-7, Massachusetts Institute of Technology (MIT), Department of Economics.
- Dan A. Black & Brett J. Noel & Zheng Wang, 1999. "On-the-Job Training, Establishment Size, and Firm Size: Evidence for Economies of Scale in the Production of Human Capital," Southern Economic Journal, Southern Economic Association, vol. 66(1), pages 82-100, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stephanie Bridges) The email address of this maintainer does not seem to be valid anymore. Please ask Stephanie Bridges to update the entry or send us the correct address.
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.