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Evaluating firm training, effects on performance and labour demand

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  • Eugenia Kazamaki Ottersten
  • Thomas Lindh Mellander

Abstract

A quality-adjusted measure of labour is developed, where labour efficiency depends on firm training. This specification is integrated into a flexible neoclassical cost function, representing the firm's production technology. Unlike traditional production functions, the cost function does not constrain all inputs to be substitutes and it allows capital to be fixed in the short run. These features are found to be important in the evaluation of the indirect effects of training. Short-run indirect effects arise through the relative price mechanism; an increase in labour efficiency decreases the quality-adjusted price of labour. Long-run indirect effects stem from the equilibrium adjustment of the quasi-fixed capital stock. The methodology is illustrated by means of a small firm panel data set. The results show that previous analyses have been overly restrictive in assuming all inputs to be substitutes. E.g., labour and capital are found to be long-run complements, implying that training increases long run labour demand, although the short-run effect is negative. The training outcomes are imprecisely estimated, but indicate that cost savings and productivity gains can be substantial.

Suggested Citation

  • Eugenia Kazamaki Ottersten & Thomas Lindh Mellander, 1999. "Evaluating firm training, effects on performance and labour demand," Applied Economics Letters, Taylor & Francis Journals, vol. 6(7), pages 431-437.
  • Handle: RePEc:taf:apeclt:v:6:y:1999:i:7:p:431-437
    DOI: 10.1080/135048599352943
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    References listed on IDEAS

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    1. Kazamaki Ottersten, Eugenia & Lindh, Thomas & Mellander, Erik, 1996. "Cost and Productivity Effects of Firm Financed Training," Working Paper Series 455, Research Institute of Industrial Economics.
    2. repec:hhs:iuiwop:455 is not listed on IDEAS
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    Cited by:

    1. Mellander, Erik, 2014. "Transparency of human resource policy," Working Paper Series 2014:24, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    2. Arslan Ayub & Masood Ul Hassan & Ibn. E. Hassan & Shahjahan Laghari, 2016. "Knowledge-Centered Culture and Knowledge-Oriented Leadership as the Key Enablers of Knowledge Creation Process: A Study of Corporate Sector in Pakistan," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 12(2), pages 51-69, April.
    3. Gérard Ballot & Fathi Fakhfakh & Erol Taymaz, 2002. "Who benefits from training and R&D: The firm or the workers? A study on panels of French and Swedish firms," ERC Working Papers 0201, ERC - Economic Research Center, Middle East Technical University, revised Jan 2002.
    4. Asplund, Rita, 2004. "The Provision and Effects of Company Training. A brief review of the literature," Discussion Papers 907, The Research Institute of the Finnish Economy.
    5. Andries de Grip & Inge Sieben, 2005. "The effects of human resource management on small firms' productivity and employees' wages," Applied Economics, Taylor & Francis Journals, vol. 37(9), pages 1047-1054.
    6. repec:dug:journl:y:2016:i:2:p:51-69 is not listed on IDEAS
    7. Maliranta, Mika & Asplund, Rita, 2007. "Training and Hiring Strategies to Improve Firm Performance," Discussion Papers 1105, The Research Institute of the Finnish Economy.
    8. Stern, David I., 2010. "Energy quality," Ecological Economics, Elsevier, vol. 69(7), pages 1471-1478, May.
    9. Håkanson, Christina & Johanson, Satu & Mellander, Erik, 2003. "Employer-Sponsored Training in Stabilisation and Growth Policy Perspectives," Working Paper Series 592, Research Institute of Industrial Economics.
    10. Erik Mellander, 2000. "The Multi-Dimensional Nature of Labor Demand and Skill-Biased Technical Change," Econometric Society World Congress 2000 Contributed Papers 0671, Econometric Society.
    11. Rita Asplund, 2005. "The Provision and Effects of Company Training: A Brief Review of the Literature," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 31, pages 47-73.
    12. Mellander, Erik, 1999. "The multi-dimensional nature of labor demand and skill-biased technical change," Working Paper Series 1999:9, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    13. Ballot, Gerard & Fakhfakh, Fathi & Taymaz, Erol, 2001. "Firms' human capital, R&D and performance: a study on French and Swedish firms," Labour Economics, Elsevier, vol. 8(4), pages 443-462, September.

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