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Productivity, wages, and the returns to firm-provided training: fair shared capitalism?


  • Ana Sofia Lopes
  • Paulino Teixeira


Purpose - – The purpose of this paper is to investigate the extent to which the productivity gains associated with workplace training are shared by both the firms concerned and their workers. The approach is both theoretical and empirical as an explicit formula for the internal rate of return for firms and workers is derived; and production and cost functions are estimated in conjunction with wage and productivity equations. Design/methodology/approach - – The authors use a unique linked employer-employee longitudinal dataset with detailed information on firm formal training and run regression models to obtain the determinants of the internal rate of return to firm-sponsored training. Analysis of training costs is also provided as well as the econometric framework required to control for firm heterogeneity. Findings - – The results obtained from the model specifications indicate that an additional hour of training per worker results in an increase of 0.12 per cent in productivity and 0.04 per cent in wages, or an increase of 0.16 and 0.08 per cent, respectively, if one uses firm training as a stock variable. It is also found that 82 per cent of the gains in productivity are captured by firms and 18 per cent by workers. Given the training costs, it is obtained an IRR of 13 per cent for firms and 33 per cent for workers at sample means. Practical implications - – Training investments are good otherwise they would not even be considered by firms. However, knowing with greater accuracy the gains captured by firms (and workers) is critical for policy makers in their decision-making process. The estimates found in the paper shows that firm training is a genuinely worthwhile investment for all participants. Originality/value - – The authors derive an explicit formula for the internal rate of return to firm-sponsored training and provide workers’ and firms’ shares of the productivity gains using firm-level data. Another original contribution is that the gains enjoyed by firms are computed as net gains, that is, net of the training costs on the one hand, and net of all the gains accruing to workers through higher wages on the other.

Suggested Citation

  • Ana Sofia Lopes & Paulino Teixeira, 2013. "Productivity, wages, and the returns to firm-provided training: fair shared capitalism?," International Journal of Manpower, Emerald Group Publishing, vol. 34(7), pages 776-793, November.
  • Handle: RePEc:eme:ijmpps:v:34:y:2013:i:7:p:776-793

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    References listed on IDEAS

    1. Almeida, Rita & Carneiro, Pedro, 2009. "The return to firm investments in human capital," Labour Economics, Elsevier, vol. 16(1), pages 97-106, January.
    2. Lorraine Dearden & Howard Reed & John Van Reenen, 2006. "The Impact of Training on Productivity and Wages: Evidence from British Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(4), pages 397-421, August.
    3. 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).
    4. Ana Sofia Lopes & Paulino Teixeira, 2009. "Unobserved Worker Ability, Firm Heterogeneity, and the Returns to Schooling and Training," GEMF Working Papers 2009-03, GEMF, Faculty of Economics, University of Coimbra.
    5. Budría, Santiago & Pereira, Pedro T., 2004. "On the Returns to Training in Portugal," IZA Discussion Papers 1429, Institute for the Study of Labor (IZA).
    6. Gérard Ballot & Fathi Fakhfakh & Erol Taymaz, 2006. "Who Benefits from Training and R&D, the Firm or the Workers?," British Journal of Industrial Relations, London School of Economics, vol. 44(3), pages 473-495, September.
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    Cited by:

    1. Benoit Dostie & Pierre Thomas Léger, 2014. "Firm-Sponsored Classroom Training: Is It Worth It for Older Workers?," Canadian Public Policy, University of Toronto Press, vol. 40(4), pages 377-390, December.

    More about this item


    Productivity; Wages; Firm-provided training; Internal rate of return; Human capital;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • I2 - Health, Education, and Welfare - - Education


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