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Human Capital Investment and Development: The Role of On-the-Job Training

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  • Xiao Ma
  • Alejandro Nakab
  • Daniela Vidart

Abstract

Workers in richer countries experience faster rates of wage growth over their lifetimes than workers in poorer countries. We offer an explanation for this pattern by showing that workers in richer economies receive more firm-provided training. Using cross-country enterprise and worker-level data, we document that the share of workers who receive firm-provided training increases with development, and that firm-provided training is a key determinant of workers’ human capital. We then build a general equilibrium search model with firm-provided training investments. Our model suggests that firm-provided training accounts for 38% of cross-country wage growth differences and 12% of cross-country income differences.

Suggested Citation

  • Xiao Ma & Alejandro Nakab & Daniela Vidart, 2024. "Human Capital Investment and Development: The Role of On-the-Job Training," Journal of Political Economy Macroeconomics, University of Chicago Press, vol. 2(1), pages 107-148.
  • Handle: RePEc:ucp:jpemac:doi:10.1086/728667
    DOI: 10.1086/728667
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    2. Nezih Guner & Alessandro Ruggieri, 2021. "Misallocation and inequality," Discussion Papers 2021/01, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • M53 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Training

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