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Market imperfections and firm-sponsored training

  • Matteo PICCHIO


    (Department of Economics, Tilburg University and IZA)

  • Jan C. VAN OURS


    (Department of Economics and CentER, Tilburg University, Department of Economics, University of Melbourne; IZA and CEPR)

Recent human capital theories predict that labor market frictions and product market competition influence firm-sponsored training. Using matched worker-firm data from Dutch manufacturing, our paper empirically assesses the validity of these predictions. We find that a decrease in labor market frictions significantly reduces firms’ training expenditures. Instead, product market competition does not have an effect on firm-sponsored training. We conclude that increasing competition through international integration and globalization does not pose a threat to investments in on-the-job training. An increase in labor market flexibility may reduce incentives of firms to invest in training, but the magnitude of this effect is small.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2010026.

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Length: 24
Date of creation: 16 Aug 2010
Date of revision:
Handle: RePEc:ctl:louvir:2010026
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