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

  • Almeida, Rita K.

    ()

    (World Bank)

  • Aterido, Reyes

    ()

    (World Bank)

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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4981.

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Length: 52 pages
Date of creation: May 2010
Date of revision:
Handle: RePEc:iza:izadps:dp4981
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  1. de Mel, Suresh & McKenzie, David & Woodruff, Christopher, 2009. "Innovative firms or innovative owners ? determinants of innovation in micro, small, and medium enterprises," Policy Research Working Paper Series 4934, The World Bank.
  2. Ibarrarán, Pablo & Maffioli, Alessandro & Stucchi, Rodolfo, 2009. "SME Policy and Firms’ Productivity in Latin America," IZA Discussion Papers 4486, Institute for the Study of Labor (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. 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 545-83, April.
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