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Market Imperfections and Firm-Sponsored Training

  • Picchio, Matteo


    (Università Politecnica delle Marche, Ancona)

  • van Ours, Jan C.


    (Tilburg University)

Recent human capital theories predict that labor market frictions and product market competition influence firm-sponsored training. Using matched worker-firm data from Dutch manufacturing, our paper empirically assesses the validity of these predictions. We find that a decrease in labor market frictions significantly reduces firms' training expenditures. Instead, product market competition does not have an effect on firm-sponsored training. We conclude that increasing competition through international integration and globalization does not pose a threat to investments in on-the-job training. An increase in labor market flexibility may reduce incentives of firms to invest in training, but the magnitude of this effect is small.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4988.

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Length: 25 pages
Date of creation: Jun 2010
Date of revision:
Publication status: published in: Labour Economics, 2011, 18 (5), 712-722
Handle: RePEc:iza:izadps:dp4988
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