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Intra-firm Wage Compression and Cost Coverage of Training: Evidence from Linked Employer-Employee Data

  • Pfeifer, Christian

This paper uses German linked employer-employee data in order to estimate the impact of intra-firm wage dispersion on the probability that firms pay for continuous training. About half of all firms in the estimation sample cover all direct and indirect training costs, which contradicts the standard human capital approach with perfect labor markets. The main finding of my cross-section, panel, and instrumental variable Probit estimations is that firms with larger intra-firm wage compression are indeed more likely to cover all direct and indirect training costs, which is consistent with theoretical considerations of the "new training literature" about imperfect labor markets.

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File URL: http://econstor.eu/bitstream/10419/80030/1/VfS_2013_pid_262.pdf
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Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 80030.

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Date of creation: 2013
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Handle: RePEc:zbw:vfsc13:80030
Contact details of provider: Web page: http://www.socialpolitik.org/
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  1. Mark A. Loewenstein & James R. Spletzer, 1999. "General and Specific Training: Evidence and Implications," Journal of Human Resources, University of Wisconsin Press, vol. 34(4), pages 710-733.
  2. Jorn-Steffen Pischke, 1996. "Continuous Training in Germany," NBER Working Papers 5829, National Bureau of Economic Research, Inc.
  3. Mohrenweiser, Jens & Zwick, Thomas, 2009. "Why do firms train apprentices? The net cost puzzle reconsidered," Labour Economics, Elsevier, vol. 16(6), pages 631-637, December.
  4. Daron Acemoglu & Jörn-Steffen Pischke, 1998. "Why Do Firms Train? Theory And Evidence," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 78-118, February.
  5. Daron Acemoglu & Joern-Steffen Pischke, 1998. "Beyond Becker: Training in Imperfect Labor Markets," Working papers 98-12, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Katja Görlitz & Joel Stiebale, 2011. "The Impact of Product Market Competition on Employers’ Training Investments. Evidence from German Establishment Panel Data," De Economist, Springer, vol. 159(1), pages 1-23, March.
  7. Winter-Ebmer, Rudolf & Zweimuller, Josef, 1999. "Intra-Firm Wage Dispersion and Firm Performance," Kyklos, Wiley Blackwell, vol. 52(4), pages 555-72.
  8. Benoît Mahy & François Rycx & Mélanie Volral, 2011. "Does Wage Dispersion Make All Firms Productive?," Working Papers CEB 11-021, ULB -- Universite Libre de Bruxelles.
  9. Acemoglu, D. & Pischke, J.S., 1997. "The Structure of Wages and Investment in General Training," Working papers 97-24, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Alison L. Booth & Mark L. Bryan, 2005. "Testing Some Predictions of Human Capital Theory: New Training Evidence from Britain," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 391-394, May.
  11. Edwin Leuven, 2005. "The Economics of Private Sector Training: A Survey of the Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 19(1), pages 91-111, 02.
  12. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
  13. Chang, Chun & Wang, Yijiang, 1996. "Human Capital Investment under Asymmetric Information: The Pigovian Conjecture Revisited," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 505-19, July.
  14. Rita Asplund, 2005. "The Provision and Effects of Company Training: A Brief Review of the Literature," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 31, pages 47-73.
  15. Katja Goerlitz, 2009. "The Development of Employers’ Training Investments Over Time – A Decomposition Analysis Using German Establishment Data," Ruhr Economic Papers 0087, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  16. Filipe Almeida-Santos & Karen Mumford, . "Employee Training and Wage Compression in Britain," Discussion Papers 04/11, Department of Economics, University of York.
  17. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
  18. Holger Alda & Stefan Bender & Hermann Gartner, 2005. "European Data Watch: The linked employer-employee dataset created from the IAB establishment panel and the process-produced data of the IAB (LIAB)," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 125(2), pages 327-336.
  19. Katz, Eliakim & Ziderman, Adrian, 1990. "Investment in General Training: The Role of Information and Labour Mobility," Economic Journal, Royal Economic Society, vol. 100(403), pages 1147-58, December.
  20. Rivers, Douglas & Vuong, Quang H., 1988. "Limited information estimators and exogeneity tests for simultaneous probit models," Journal of Econometrics, Elsevier, vol. 39(3), pages 347-366, November.
  21. Loewenstein, Mark A & Spletzer, James R, 1998. "Dividing the Costs and Returns to General Training," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 142-71, January.
  22. R. S. Eckaus, 1963. "Investment in Human Capital: A Comment," Journal of Political Economy, University of Chicago Press, vol. 71, pages 501.
  23. Christian Dustmann & Uta Schönberg, 2009. "Training and Union Wages," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 363-376, May.
  24. Bellmann, Lutz & Hohendanner, Christian & Hujer, Reinhard, 2010. "Determinants of Employer-Provided Further Training: A Multi-Level Approach," IZA Discussion Papers 5257, Institute for the Study of Labor (IZA).
  25. Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 225-38, January.
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