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Only the brave? Risk and time preferences of decision makers and firms' investment in worker training

Author

Listed:
  • Anika Jansen

    (Federal Institute for Vocational Education and Training (BIBB), Bonn)

  • Harald Pfeifer

    (Federal Institute for Vocational Education and Training (BIBB), Bonn, and Research Centre for Education and the Labour Market (ROA), Maastricht)

  • Julia Raecke

    (Federal Institute for Vocational Education and Training (BIBB), Bonn)

Abstract

In this paper, we study the relation between decision makers' preferences and training investments of their firms. First, we develop a theoretical framework, which takes the possibility into account that individual preferences of decision makers may influence firm behavior with respect to training. We then develop and test the hypothesis that the willingness to take risks or the preference for future profits of decision makers is positively related and procrastination negatively related to firms' investment in worker training. Using unique firm-level data, including both person-level preference measures and firm-level information about training costs, we find empirical support for our hypothesis. Training investment is higher in firms with risk-inclined decision makers and lower in firms with procrastinating decision makers. The preference for future profits is relevant for training participation and the number of trained workers, but not for the training investment per worker. The results imply that firms have scope to adjust their profit-maximizing strategies by taking the individual preferences of their decision makers into account.

Suggested Citation

  • Anika Jansen & Harald Pfeifer & Julia Raecke, 2017. "Only the brave? Risk and time preferences of decision makers and firms' investment in worker training," Economics of Education Working Paper Series 0124, University of Zurich, Department of Business Administration (IBW).
  • Handle: RePEc:iso:educat:0124
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    References listed on IDEAS

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    More about this item

    Keywords

    Risk and time preferences; training investment; profit maximization;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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