Productivity, Wages, and the Returns to Firm-Provided Training: Fair Share Capitalism?
In this study, we develop an alternative modelling that examines a) the determinants of firm productivity and wages and b) the internal rate of return (IRR) to firm training for both firms and workers. Using a six-year linked employer-employee dataset, our estimates indicate that an additional hour of training per worker results in an increase of 0.12% in productivity and 0.04% in wages, or an increase of 0.16% and 0.08%, respectively, if one uses firm training as a stock variable. We then find that 82% of the gains in productivity are captured by firms and 18% by workers. Given the training costs, we finally obtain an IRR of 13% for firms and 33% for workers at sample means. Firms are heterogeneous, and we do find that dispersion in the rates of return across firms is high.
|Date of creation:||Apr 2010|
|Date of revision:||Jul 2012|
|Publication status:||Published in International Journal of Manpower 34(7): 776-793, 2013.|
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"The return to firm investment in human capital,"
Policy Research Working Paper Series
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- Lorraine Dearden & Howard Reed & John Van Reenen, 2005.
"The impact of training on productivity and wages : evidence from British panel data,"
Economic History Working Papers
779, London School of Economics and Political Science, Department of Economic History.
- Lorraine Dearden & Howard Reed & John Van Reenen, 2006. "The Impact of Training on Productivity and Wages: Evidence from British Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(4), pages 397-421, 08.
- Lorraine Dearden & Howard Reed & John Van Reenen, 2005. "The impact of training on productivity and wages: evidence from British panel data," IFS Working Papers W05/16, Institute for Fiscal Studies.
- Lorraine Dearden & Howard Reed & John Van Reenen, 2005. "The Impact of Training on Productivity and Wages: Evidence from British Panel Data," CEP Discussion Papers dp0674, Centre for Economic Performance, LSE.
- Ana Sofia Lopes & Paulino Teixeira, 2009. "Unobserved Worker Ability, Firm Heterogeneity, and the Returns to Schooling and Training," GEMF Working Papers 2009-03, GEMF - Faculdade de Economia, Universidade de Coimbra.
- Gérard Ballot & Fathi Fakhfakh & Erol Taymaz, 2006. "Who Benefits from Training and R&D, the Firm or the Workers?," British Journal of Industrial Relations, London School of Economics, vol. 44(3), pages 473-495, 09.
- Harley Frazis & Mark A. Loewenstein, 2005. "Reexamining the Returns to Training: Functional Form, Magnitude, and Interpretation," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
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