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The Investment in Job Training: Why Are SMEs Lagging So Much Behind?

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  • Almeida, Rita K.

    (World Bank)

  • Aterido, Reyes

    (World Bank)

Abstract

This paper analyzes the link between firm size and the investment in job training by employers. Using a large firm level data set across 99 developing countries, we show that a strong and positive correlation in the investment in job training and firm size is a robust statistical finding both within and across countries with very different institutions and level of development. However, our findings do not support the view that this difference is mostly driven by market imperfections disproportionally affecting SMEs. Rather, our evidence is supportive of SMEs having a smaller expected return from the investment in job training than larger firms. Therefore, our findings call for caution when designing pro-SME policies fostering the investment in on the job training.

Suggested Citation

  • Almeida, Rita K. & Aterido, Reyes, 2010. "The Investment in Job Training: Why Are SMEs Lagging So Much Behind?," IZA Discussion Papers 4981, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp4981
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    References listed on IDEAS

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    1. Van Biesebroeck, Johannes, 2005. "Firm Size Matters: Growth and Productivity Growth in African Manufacturing," Economic Development and Cultural Change, University of Chicago Press, vol. 53(3), pages 545-583, April.
    2. de Mel, Suresh & McKenzie, David & Woodruff, Christopher, 2009. "Innovative Firms or Innovative Owners? Determinants of Innovation in Micro, Small, and Medium Enterprises," IZA Discussion Papers 3962, Institute of Labor Economics (IZA).
    3. Hong Tan & Lopez-Acevedo, Gladys, 2003. "Mexico : in-firm training for the knowledge economy," Policy Research Working Paper Series 2957, The World Bank.
    4. Ibarrarán, Pablo & Maffioli, Alessandro & Stucchi, Rodolfo, 2009. "SME Policy and Firms’ Productivity in Latin America," IZA Discussion Papers 4486, Institute of Labor Economics (IZA).
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    Cited by:

    1. Weller, Jürgen, 2022. "Tendencias mundiales, pandemia de COVID-19 y desafíos de la inclusión laboral en América Latina y el Caribe," Documentos de Proyectos 48610, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    2. Rita Almeida & Marta Faria, 2014. "The wage returns to on-the-job training: evidence from matched employer-employee data," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-33, December.
    3. Sampson, Thomas, 2013. "Brain drain or brain gain? Technology diffusion and learning on-the-job," Journal of International Economics, Elsevier, vol. 90(1), pages 162-176.
    4. Zafiris Tzannatos & Ishac Diwan & Joanna Abdel Ahad, 2016. "Rates of Return to Education in Twenty Two Arab Countries: an Update and Comparison Between MENA and the Rest of the World," Working Papers 1007, Economic Research Forum, revised May 2016.
    5. Carpio, Susana & Giuliodori, David & Rucci, Graciana & Stucchi, Rodolfo, 2011. "The Effect of Temporary Contracts on Human Capital Accumulation in Chile," IDB Publications (Working Papers) 3030, Inter-American Development Bank.
    6. Holzmann, Robert, 2010. "Bringing financial literacy and education to low and middle income countries : the need to review, adjust, and extend current wisdom," Social Protection Discussion Papers and Notes 56501, The World Bank.
    7. Susana Carpio & David Giuliodori & Graciana Rucci & Rodolfo Stucchi, 2011. "The Effect of Temporary Contracts on Human Capital Accumulation in Chile," IDB Publications (Working Papers) 35358, Inter-American Development Bank.
    8. Floreani, Vincent Arthur, 2014. "Fixing Europe's youth unemployment and skills mismatch, can public financial support to SMEs be effective? The case of the European Commission and European Investment Bank joint initiatives," MPRA Paper 55849, University Library of Munich, Germany.
    9. Hansen, Ellen, & Avila, Zulum., 2012. "Preliminary assessment of training and retraining programmes implemented in response to the Great Recession :," ILO Working Papers 994684193402676, International Labour Organization.
    10. repec:ilo:ilowps:468419 is not listed on IDEAS
    11. Almeida, Rita K. & Aterido, Reyes, 2011. "On-the-job training and rigidity of employment protection in the developing world: Evidence from differential enforcement," Labour Economics, Elsevier, vol. 18(S1), pages 71-82.
    12. Lord, Janet & Posarac, Aleksandra & Nicoli, Marco & Peffley, Karen & Mcclain-Nhlapo, Charlotte & Keogh, Mary, 2010. "Disability and international cooperation and development : a review of policies and practices," Social Protection Discussion Papers and Notes 56092, The World Bank.

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    More about this item

    Keywords

    on-the-job training; firm size; firm level data; developing countries;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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