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Employment effects of on-the-job human capital acquisition

Author

Listed:
  • Joaquín Naval

    (Universitat de Girona)

  • José I. Silva

    (Universitat de Girona)

  • Javier Vázquez-Grenno

    (Universitat de Barcelona & IEB)

Abstract

This paper quantifies the joint effect of on-the-job training and workers' on-the-job learning decisions on aggregate employment. We present an Index of On-the-job Human Capital Acquisition (OJHCA), based on data from the OECD Program for the International Assessment of Adult Competencies. The objective of the index is to capture both formal and informal learning in the workplace. We document a strong positive association between the two components of our index, i.e., on-the-job training and on-the-job learning. We also show that the index is positively correlated with employment across OECD economies. To explain these stylized facts, we build a search and matching model with on-the-job human capital acquisition that depends on both on-the-job training provided by firms and on the workers' level of on-the-job learning. We calibrate the model to the Canadian economy and adjust the learning and training marginal costs to match cross-country levels in the human capital index. We compare the model's predictions with the data and we conclude that differences in marginal costs are necessary to match the differences observed in employment rates across countries. We also extend the model including payroll taxes and education. The model is able to reproduce the observed differences in employment rates between countries with the highest and the lowest level of OJHCA.

Suggested Citation

  • Joaquín Naval & José I. Silva & Javier Vázquez-Grenno, 2018. "Employment effects of on-the-job human capital acquisition," Working Papers 2018/05, Institut d'Economia de Barcelona (IEB).
  • Handle: RePEc:ieb:wpaper:doc2018-05
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    References listed on IDEAS

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    More about this item

    Keywords

    Employment; labor productivity; human capital; search and matching;
    All these keywords.

    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
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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