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Why Do Employers Pay For College?

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  • Peter Cappelli
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    Abstract

    Employers routinely provide financial support for their employees who pursue post-secondary education despite the fact that it represents perhaps the classic example of a general skill' that costs the employer money and raises the market wages of employees who possess it. The analysis below examines why employers provide such support, and the results suggest that employees do not pay for tuition assistance through below market or training wages, the typical arrangement for funding general skills training. Instead, tuition assistance appears to select better quality employees who stay on the job longer, at least in part to keep making use of that benefit.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9225.

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    Date of creation: Sep 2002
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    Publication status: published as Cappelli, Peter. “Why Do Employers Pay for College?” Journal of Econometrics 121, 1-2 (August 2004): 213-241.
    Handle: RePEc:nbr:nberwo:9225

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    1. John M. Barron & Mark C. Berger & Dan A. Black, 1997. "On-the-Job Training," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, W.E. Upjohn Institute for Employment Research, number ojt.
    2. Acemoglu, D. & Pischki, J.S., 1996. "Why Do Firms Train? Theory and Evidence," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 96-7, Massachusetts Institute of Technology (MIT), Department of Economics.
    3. Peter Cappelli & David Neumark, 2001. "Do "high-performance" work practices improve establishment-level outcomes?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(4), pages 737-775, July.
    4. John M. Barron & Mark C. Berger & Dan A. Black, 1999. "Do Workers Pay for On-The-Job Training?," Journal of Human Resources, University of Wisconsin Press, vol. 34(2), pages 235-252.
    5. McCall, John J, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 84(1), pages 113-26, February.
    6. Katz, Eliakim & Ziderman, Adrian, 1990. "Investment in General Training: The Role of Information and Labour Mobility," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 100(403), pages 1147-58, December.
    7. Bowlus, Audra J, 1995. "Matching Workers and Jobs: Cyclical Fluctuations in Match Quality," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 13(2), pages 335-50, April.
    8. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 97(4), pages 543-69, November.
    9. Magee, L. & Robb, A. L. & Burbidge, J. B., 1998. "On the use of sampling weights when estimating regression models with survey data," Journal of Econometrics, Elsevier, Elsevier, vol. 84(2), pages 251-271, June.
    10. Daron Acemoglu & Jorn-Steffen Pischke, 1998. "Beyond Becker: Training in Imperfect Labor Markets," NBER Working Papers 6740, National Bureau of Economic Research, Inc.
    11. Simon, Curtis J & Warner, John T, 1992. "Matchmaker, Matchmaker: The Effect of Old Boy Networks on Job Match Quality, Earnings, and Tenure," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 10(3), pages 306-30, July.
    12. Peter Cappelli & David Neumark, 2001. "External Job Churning and Internal Job Flexibility," NBER Working Papers 8111, National Bureau of Economic Research, Inc.
    13. David H. Autor, 2000. "Why Do Temporary Help Firms Provide Free General Skills Training?," NBER Working Papers 7637, National Bureau of Economic Research, Inc.
    14. Stevens, Margaret, 1994. "An Investment Model for the Supply of Training by Employers," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 104(424), pages 556-70, May.
    15. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(5), pages 972-90, October.
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    Cited by:
    1. V. Bhaskar & Steinar Holden, 2002. "Wage Differentiation via Subsidised General Training," Economics Discussion Papers, University of Essex, Department of Economics 549, University of Essex, Department of Economics.
    2. Lazear, Edward, 2003. "Firm-Specific Human Capital: A Skill-Weights Approach," IZA Discussion Papers 813, Institute for the Study of Labor (IZA).
    3. Edward P. Lazear, 2003. "Firm-Specific Human Capital: A Skill-Weights Approach," NBER Working Papers 9679, National Bureau of Economic Research, Inc.
    4. Sylvain, Serginio, 2014. "Does Human Capital Risk Explain The Value Premium Puzzle?," MPRA Paper 54551, University Library of Munich, Germany.

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