Advanced Digital Technologies and Investment in Employee Training

Using firm-level data covering 25 EU countries, the UK and the US and a difference-in-differences approach, we show that employers adopting advanced digital technologies reduce their investment in training per employee. Compared to non-adapting firms, this reduction is negligible on impact but increases to -11.3 and -13.8 percent of the pre-treatment mean two and three years after adoption. It can be decomposed into two contrasting effects: the increase in the probability of investing in training and the reduction in investment by firms with positive training. We argue that a candidate reason for the decline in investment in training per employee is that the use of advanced digital technologies and employee training are substitutes in production, implying that an increase in the former negatively affects the marginal productivity of the latter. Our findings point to challenges in realizing high levels of firm-sponsored training for employees in increasingly digital economies.