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

Author

Listed:
  • 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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    Citations

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    Cited by:

    1. Benoit Dostie & Genevieve Dufour & Philip Merrigan, 2026. "Étude rétrospective et prospective de la loi favorisant le développement et la reconnaissance des compétences de la main-d’œuvre," CIRANO Project Reports 2026rp-08, CIRANO.
    2. Ali Amna Ahmad Hassan & Mohd Ridwan Bin Abd Razak, 2026. "A Framework of the Effect of Human Capital Development on Employee Performance: The Mediating Role of Job Satisfaction in UAE Private Banks," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 10(14), pages 1272-1280, January.
    3. Chatterjee, Sidharta & Samanta, Mousumi, 2025. "Noetic Capital and the Economics of Productivity," MPRA Paper 125071, University Library of Munich, Germany.
    4. Albanese, Mattia & Aliberti, Manfredi, 2024. "Workplace Training Unpacked: Labor Market Competition and Investment in General Skills," SocArXiv 4ugq5, Center for Open Science.
    5. Luis E. Arango & Leonardo Bonilla-Mejía & Luz A. Flórez, 2025. "Costs of training and the demand for apprentices," Borradores de Economia 1312, Banco de la Republica de Colombia.
    6. Falck, Oliver & Guo, Yuchen & Langer, Christina & Lindlacher, Valentin & Wiederhold, Simon, 2024. "Training, Automation, and Wages: International Worker-Level Evidence," IZA Discussion Papers 17503, IZA Network @ LISER.
    7. Rossi,Federico & Michael Weber, 2024. "The Accumulation and Utilization of Human Capital over the Development Spectrum," Policy Research Working Paper Series 10891, The World Bank.
    8. David J. Deming & Mikko I. Silliman, 2024. "Skills and Human Capital in the Labor Market," NBER Working Papers 32908, National Bureau of Economic Research, Inc.
    9. Nezih Guner & Alessandro Ruggieri, 2021. "Misallocation and inequality," Discussion Papers 2021/01, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    10. repec:ces:ceswps:_11533 is not listed on IDEAS
    11. Xiao Ma & Alejandro Nakab & Camila Navajas-Ahumada & Daniela Vidart, 2025. "The Motherhood Training Penalty," Working papers 2025-04, University of Connecticut, Department of Economics.
    12. Boese-Schlosser, Vanessa A. & Eberhardt, Markus, 2024. "Democracy Doesn’t Always Happen Over Night: Regime Change in Stages and Economic Growth," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue Forthcomi, pages 1-29.
    13. Falck, Oliver & Guo, Yuchen & Langer, Christina & Lindlacher, Valentin & Wiederhold, Simon, 2026. "Firm training, automation, and wages: International worker-level evidence," Research Policy, Elsevier, vol. 55(3).
    14. Xiao Ma & Alejandro Nakab & Yiran Zhang, 2026. "Skill Acquisition and the Gains From Trade: A Cross‐Country Quantitative Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 67(1), pages 127-150, February.
    15. Alberto Rivera‐Padilla, 2025. "Life‐Cycle Wage Growth and Internal Migration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 66(4), pages 1505-1523, October.

    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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