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Estimating the Returns to Firm-Sponsored on-the-Job and Classroom Training


  • Benoit Dostie


In this paper, we estimate returns to classroom and on-the-job firm sponsored training in terms of value-added per worker using longitudinal linked employee-employer Canadian data from 1999 to 2006. We estimate a standard production function controlling for endogenous training decisions because of perceived net benefits and time-varying market conditions using dynamic panel GMM methods. We find that employees who undertook classroom training are 11 percent more productive than otherwise similar employees. We show that returns to on-the-job training are on average lower (3:4 percent). We provide evidence that these lower returns are due to on-the-job training being more closely related to turnover and more geared toward subjects that are less productivity-enhancing. Nous estimons dans cet article les rendements de la formation parrainée par l'employeur, en classe et en cours d'emploi, en termes de valeur ajoutée par travailleur en utilisant les données de l'Enquête sur le milieu de travail et les employés (EMTE) de Statistique Canada pour la période 1999-2006. Nous estimons une fonction de production où nous tenons compte de l'endogénéité des décisions de formation des entreprises due aux bénéfices escomptés et aux conditions de marché en utilisant une version dynamique de la méthode des moments généralisés. Nous trouvons que les employés ayant reçu de la formation en classe sont 11 % plus productif. Par contre, nous trouvons que les rendements de la formation en cours d'emploi sont inférieurs (3,4 %). Nous montrons que ces rendements inférieurs sont expliqués par le fait que la formation en cours d'emploi est reliée plus étroitement au roulement de la main d'oeuvre et que les sujets qui y sont traités ont moins d'impacts sur la productivité.

Suggested Citation

  • Benoit Dostie, 2010. "Estimating the Returns to Firm-Sponsored on-the-Job and Classroom Training," CIRANO Working Papers 2010s-44, CIRANO.
  • Handle: RePEc:cir:cirwor:2010s-44

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    References listed on IDEAS

    1. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, and the Demand for Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, Oxford University Press, pages 339-376.
    2. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
    3. 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.
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    Cited by:

    1. Preeya Mohan & Eric Strobl & Patrick Watson, 2017. "In-Firm Training, Innovation and Productivity: The Case of Caribbean Small Island Developing States," IDB Publications (Working Papers) 8216, Inter-American Development Bank.
    2. Wen Ci & Jose Galdo & Marcel Voia & Christopher Worswick, 2015. "Wage returns to mid-career investments in job training through employer supported course enrollment: evidence for Canada," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), pages 1-25.
    3. Preeya Mohan & Eric Strobl & Patrick Watson, 2017. "In-Firm Training, Innovation and Productivity: The Case of Caribbean Small Island Developing States," IDB Publications (Working Papers) 98136, Inter-American Development Bank.
    4. Dostie, Benoit & Javdani, Mohsen, 2017. "Not for the Profit, but for the Training? Gender Differences in Training in the For-Profit and Non-Profit Sectors," IZA Discussion Papers 11108, Institute for the Study of Labor (IZA).
    5. Dostie, Benoit, 2014. "Innovation, Productivity, and Training," IZA Discussion Papers 8506, Institute for the Study of Labor (IZA).
    6. Benoit Dostie, 2015. "Who benefits from firm-sponsored training?," IZA World of Labor, Institute for the Study of Labor (IZA), pages 145-145.

    More about this item


    Productivity; On-the-job training; Classroom training; Turnover; Linked employer-employee data; Productivité; formation en cours d'emploi; formation en classe; roulement de la main-d'oeuvre; données employeur-employé liées;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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