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The Return to the Firm Investment in Human Capital

  • Almeida, Rita K.


    (World Bank)

  • Carneiro, Pedro


    (University College London)

In this paper we estimate the rate of return to firm investments in human capital in the form of formal job training. We use a panel of large firms with unusually detailed information on the duration of training, the direct costs of training, and several firm characteristics such as their output, workforce characteristics and capital stock. Our estimates of the return to training vary substantially across firms. On average it is -7% for firms not providing training and 24% for those providing training. Formal job training is a good investment for many firms and the economy, possibly yielding higher returns than either investments in physical capital or investments in schooling. In spite of this, observed amounts of formal training are very small.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1937.

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Length: 32 pages
Date of creation: Jan 2006
Date of revision:
Publication status: published in: Labour Economics, 2009, 16 (1), 97-106
Handle: RePEc:iza:izadps:dp1937
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  20. Carneiro, Pedro & Hansen, Karsten & Heckman, James, 2003. "Estimating distributions of treatment effects with an application to the returns to schooling and measurement of the effects of uncertainty on college choice," Working Paper Series 2003:9, IFAU - Institute for Evaluation of Labour Market and Education Policy.
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  25. Booth, Alison L, 1991. "Job-Related Formal Training: Who Receives It and What Is It Worth?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 53(3), pages 281-94, August.
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  29. repec:spr:pharme:v:22:y:2004:i:4:p:225-244 is not listed on IDEAS
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