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The return to firm investment in human capital

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Author Info
Almeida, Rita
Carneiro, Pedro

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Abstract

In this paper the authors estimate the rate of return to firm investments in human capital in the form of formal job training. They use a panel of large firms with unusually 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. Their estimates of the return to training vary substantially across firms. On average it is -7 percent for firms not providing training and 24 percent for those providing training. Formal job trainingis a good investment for many firms and the economy, possibly yielding higher returns than either investments in physical capital or investments in schooling. In spite of this, observed amounts of formal training are small.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3851.

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Date of creation: 01 Feb 2006
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Handle: RePEc:wbk:wbrwps:3851

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Keywords: Primary Education; Education For All; Access&Equity in Basic Education; Tertiary Education; Economic Theory&Research;

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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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  4. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," Harvard Institute of Economic Research Working Papers 1719, Harvard - Institute of Economic Research.
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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)
  8. Dearden, Lorraine & Reed, Howard & Van Reenen, John, 2000. "Who Gains when Workers Train? Training and Corporate Productivity in a Panel of British Industries," CEPR Discussion Papers 2486, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July. [Downloadable!] (restricted)
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  10. Barron, John M & Black, Dan A & Loewenstein, Mark A, 1989. "Job Matching and On-the-Job Training," Journal of Labor Economics, University of Chicago Press, vol. 7(1), pages 1-19, January. [Downloadable!] (restricted)
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  15. James Levinsohn & Amil Petrin, 2000. "Estimating Production Functions Using Inputs to Control for Unobservables," NBER Working Papers 7819, 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)
  20. Ann P. Bartel, 1995. "Training, Wage Growth and Job Performance: Evidence From a Company Database," NBER Working Papers 4027, National Bureau of Economic Research, Inc. [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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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. 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!]
  3. 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!]
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