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The Impact of Aggregate and Sectoral Fluctuations on Training Decisions

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Author Info

  • Caponi, Vincenzo
  • Kayahan, Cevat Burc
  • Plesca, Miana

Abstract

The literature has not yet resolved whether the effect of macroeconomic fluctuations on training decisions is positive or negative. On the one hand, the opportunity cost to train is lower during downturns, and thus training should be counter-cyclical. On the other hand, a positive shock may be related to the adoption of new technologies and increased returns to skill, making training incidence pro-cyclical. Using the Canadian panel of Workplace and Employee Survey (WES), we document another important channel at work: the relative position of a sector also matters. We find not only that training moves counter-cyclically with the aggregate business cycle (more training during downturns), but also that the idiosyncratic sectoral shocks have a positive impact on training incidence (more training in sectors doing relatively better). These findings help us better understand training decisions by firms.

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File URL: http://www.clsrn.econ.ubc.ca/workingpapers/CLSRN%20Working%20Paper%20no.%2045%20-%20Caponi,%20Kayahan%20and%20Plesca.pdf
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Bibliographic Info

Paper provided by Vancouver School of Economics in its series CLSSRN working papers with number clsrn_admin-2009-54.

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Length: 33 pages
Date of creation: 25 Oct 2009
Date of revision: 25 Oct 2009
Handle: RePEc:ubc:clssrn:clsrn_admin-2009-54

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Web page: http://www.clsrn.econ.ubc.ca/

Related research

Keywords: Training; Human capital; Business cycles; Sectoral shocks;

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References

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  1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  2. Devereux, Paul J, 2000. "Task Assignment over the Business Cycle," Journal of Labor Economics, University of Chicago Press, vol. 18(1), pages 98-124, January.
  3. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  4. Harris Dellas & Plutarchos Sakellaris, 2003. "On the cyclicality of schooling: theory and evidence," Oxford Economic Papers, Oxford University Press, vol. 55(1), pages 148-172, January.
  5. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  6. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  7. Lorraine Dearden & Howard Reed & John Van Reenen, 2005. "The impact of training on productivity and wages: evidence from British panel data," IFS Working Papers W05/16, Institute for Fiscal Studies.
  8. Ian King & Arthur Sweetman, 2002. "Procyclical Skill Retooling and Equilibrium Search," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(3), pages 704-717, July.
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Cited by:
  1. Sala, Hector & Silva, José I., 2011. "Labor Productivity and Vocational Training: Evidence from Europe," IZA Discussion Papers 6171, Institute for the Study of Labor (IZA).

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