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Discussion Paper Details

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Title: Market imperfections and firm-sponsored training

Author(s): Matteo Picchio and Jan C. van Ours

Publication Date: June 2010

Keyword(s): firm-sponsored training, labor market frictions, matched worker-firm data and product market competition

Programme Area(s): Labour Economics

Abstract: 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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Bibliographic Reference

Picchio, M and van Ours, J. 2010. 'Market imperfections and firm-sponsored training'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7881