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Estimating the Returns to Firm-Sponsored On-the-Job and Classroom Training


  • Dostie, Benoit

    () (HEC Montreal)


In this paper, we estimate returns to classroom and on-the-job firm-sponsored training in terms of value-added per worker using longitudinal linked employee-employer Canadian data from 1999 to 2006. We estimate a standard production function controlling for endogenous training decisions because of perceived net benefits and time-varying market conditions using dynamic panel GMM methods. We find that employees who undertook classroom training are 11 percent more productive than otherwise similar employees. We show that returns to on-the-job training are on average lower (3.4 percent). We provide evidence that these lower returns are due to on-the-job training being more closely related to turnover and more geared toward subjects that are less productivity-enhancing.

Suggested Citation

  • Dostie, Benoit, 2010. "Estimating the Returns to Firm-Sponsored On-the-Job and Classroom Training," IZA Discussion Papers 5258, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp5258

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    References listed on IDEAS

    1. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, and the Demand for Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 339-376.
    2. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
    3. Barron, John M & Black, Dan A & Loewenstein, Mark A, 1987. "Employer Size: The Implications for Search, Training, Capital Investment, Starting Wages, and Wage Growth," Journal of Labor Economics, University of Chicago Press, vol. 5(1), pages 76-89, January.
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    Cited by:

    1. Preeya Mohan & Eric Strobl & Patrick Watson, 2017. "In-Firm Training, Innovation and Productivity: The Case of Caribbean Small Island Developing States," IDB Publications (Working Papers) 8216, Inter-American Development Bank.
    2. Wen Ci & Jose Galdo & Marcel Voia & Christopher Worswick, 2015. "Wage returns to mid-career investments in job training through employer supported course enrollment: evidence for Canada," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-25, December.
    3. Preeya Mohan & Eric Strobl & Patrick Watson, 2017. "In-Firm Training, Innovation and Productivity: The Case of Caribbean Small Island Developing States," IDB Publications (Working Papers) 98136, Inter-American Development Bank.
    4. Dostie, Benoit & Javdani, Mohsen, 2017. "Not for the Profit, but for the Training? Gender Differences in Training in the For-Profit and Non-Profit Sectors," IZA Discussion Papers 11108, Institute for the Study of Labor (IZA).
    5. Dostie, Benoit, 2014. "Innovation, Productivity, and Training," IZA Discussion Papers 8506, Institute for the Study of Labor (IZA).
    6. repec:wsi:serxxx:v:57:y:2012:i:03:n:s0217590812500208 is not listed on IDEAS
    7. Benoit Dostie, 2015. "Who benefits from firm-sponsored training?," IZA World of Labor, Institute for the Study of Labor (IZA), pages 145-145, April.

    More about this item


    subjects of training; productivity; on-the-job training; classroom training; turnover;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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