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Evaluating the effect of tax deductions on training

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Author Info

  • Edwin Leuven

    (University of Amsterdam)

  • Hessel Oosterbeek

    (University of Amsterdam)

Abstract

Due to a tax law implemented in 1998, Dutch employers can claim an extra tax deduction when they train employees aged 40 years or older. This causes a discontinuity in a firm's cost of training an employee. We exploit this discontinuity to identify two effects: the effect of the tax deduction on training participation, and the effect of training participation on wages. We find that the training rate of workers just above 40 is about 15-20 percent higher than the training rate of workers just below 40. This difference cannot entirely be attributed to the stimulating effect of the tax deduction. Our estimates show that spill- over effects on workers younger than 40 are so substantial that the net effect of the age-dependent tax deduction is zero.

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File URL: http://128.118.178.162/eps/lab/papers/0205/0205001.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Labor and Demography with number 0205001.

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Length: 26 pages
Date of creation: 08 May 2002
Date of revision:
Handle: RePEc:wpa:wuwpla:0205001

Note: Type of Document - pdf; pages: 26
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Web page: http://128.118.178.162

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Keywords: Training; wages;

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  1. Barron, John M & Berger, Mark C & Black, Dan A, 1997. "How Well Do We Measure Training?," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 507-28, July.
  2. Lynch, Lisa M, 1992. "Private-Sector Training and the Earnings of Young Workers," American Economic Review, American Economic Association, vol. 82(1), pages 299-312, March.
  3. Booth, Alison L, 1993. "Private Sector Training and Graduate Earnings," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 164-70, February.
  4. Pischke, Jörn-Steffen, 2000. "Continuous Training in Germany," IZA Discussion Papers 137, Institute for the Study of Labor (IZA).
  5. Harmon, Colm & Walker, Ian, 1995. "Estimates of the Economic Return to Schooling for the United Kingdom," American Economic Review, American Economic Association, vol. 85(5), pages 1278-86, December.
  6. Joshua D. Angrist & Victor Lavy, 1999. "Using Maimonides' Rule To Estimate The Effect Of Class Size On Scholastic Achievement," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 533-575, May.
  7. Tomas Philipson, 1999. "External Treatment Effects and Program Implementation Bias," Working Papers 9929, Harris School of Public Policy Studies, University of Chicago.
  8. Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, vol. 69(1), pages 201-09, January.
  9. Joshua Angrist & Victor Lavy, 2002. "New Evidence on Classroom Computers and Pupil Learning," Economic Journal, Royal Economic Society, vol. 112(482), pages 735-765, October.
  10. Anne B. Royalty, 1996. "The effects of job turnover on the training of men and women," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 49(3), pages 505-521, April.
  11. Barron, John M & Black, Dan A & Loewenstein, Mark A, 1987. "Employer Size: The Implications for Search, Training, Capital Investment, Starting Wages, and Wage Growth," Journal of Labor Economics, University of Chicago Press, vol. 5(1), pages 76-89, January.
  12. John Bishop, 1994. "The Impact of Previous Training on Productivity and Wages," NBER Chapters, in: Training and the Private Sector, pages 161-200 National Bureau of Economic Research, Inc.
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