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Using firm-level data covering the 27 EU countries, the UK and the US, we show that employers tend to reduce investment in training per employee after adopting advanced digital technologies (ADT). We estimate with a control function approach firm-level production functions augmented with two factors, the training stock per employee and digital technology use. We show that ADT use and employee training are substitutes in production, implying that an increase in the former negatively affects the marginal productivity of the latter, and that a decline in the cost of introducing ADT reduces employers' investment in training per employee. These findings point to challenges in realizing high levels of firm-sponsored training for employees in increasingly digital economies.

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Using a representative sample of European firms, we study whether and to what extent financing constraints affect employers' decision to invest in employee training. We combine survey data on investment activities with administrative data on financial statements to develop an index of financing constraints. We estimate that a 10 per cent increase in this index reduces investment in training as a share of fixed assets by 2.9 to 4.5 per cent and investment in training per employee by 1.8 to 2.5 per cent. We document that lower investment in training reduces productivity, and show that firms facing tighter financing constraints cut back the investment in training and tangible assets less than the investment in R&D and software and data.

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This paper reviews both the theoretical underpinnings and the empirical evidence in support of the under-provision of general training. In spite of many theoretical reasons for the realization of inefficient levels of training, it is difficult to find convincing empirical evidence. Taking as a starting point the large empirical literature showing that employers provide and pay for general training, we argue that, if firms invest in general training, important evidence on under-provision can be obtained by looking at the relationship between investment in training and turnover. Using the seven waves (1995-2001) of the European Community Household Panel (ECHP) for 12 European countries, we find a negative but not statistically significant relationship between training and turnover. We conclude that, at the current state of the knowledge, it is difficult to justify training policies widespread in many European countries using efficiency arguments.

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In this report, the author aims to review the existing evidence on the costs and benefits of training in Europe (focusing mainly but not exclusively on formal workplace training) and use such evidence to discuss training policy. Firstly a theoretical framework is provided and measurement issues considered. Key stylized facts are then presented, followed by an analysis of the costs and benefits of training, which informs the discussion of policy issues. Due to an an abundance of material in this area, much of this detail is contained in a lengthy appendix. A conclusion follows, which includes: Private returns to training vary significantly across countries; Training positively affects productivity, and not all the productivity gains resulting from training are compensated through a corresponding increase in individual remuneration, therefore, the investment in training remains profitable for firms; Training increases employability, especially for older workers, who gain little in terms of earnings; There is no clear-cut evidence that the level of workplace training produced by firms and employees is significantly lower than the socially efficient level; Compared to the US, the distribution of training opportunities in Europe is significantly affected by circumstances which are usually considered to be beyond the individual control, such as parental education; Governments have an important role to play in improving information about training opportunities, setting appropriate legal frameworks and ensuring portability of skills; and Product and labour market reforms do affect training participation. Show less

We develop a theoretical and empirical analysis of the impact of barriers to entry on workplace training. Our theoretical model yields ambiguous predictions on the sign of this relationship. On the one hand, given the number of firms, a deregulation reduces profits per unit of output, and thereby reduces training. On the other hand, the number of firms increases, and so does the output gain from training, which facilitates the investment in training. Our numerical simulation shows that for reasonable values of the parameters a negative relationship prevails. We use repeated cross section data from the European Labour Force Survey to investigate empirically the relationship between product market regulation and training incidence in a sample of 15 European countries and 13 industrial sectors, which we follow for about 7 years. Our empirical results are unambiguous and show that an increase in product market deregulation generates a sizeable increase in training incidence.

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This conference paper focuses on training provided by firms. Many empirical studies demonstrate considerable variation across countries and across socio-economic groups in training participation rates, with Nordic countries showing higher participation than Southern European countries, and low-educated and older workers generally participating less than other groups in training activities. To investigate the reasons for this situation, the authors examine both the theoretical underpinnings and the empirical evidence in support of the under-provision of training. Under-provision is used to denote when 'training is below its efficient level, which equalises marginal social benefits to marginal social costs'. The authors argue that, if firms invest in general training, important evidence on under-provision can be gathered by examining the relationship between investment in training and labour turnover. They find evidence of a 'statistically significant and positive relationship between employer-provided training and subsequent turnover' for Denmark, Belgium, France and the UK. In the remaining countries the relationship is either not statistically significant or negative and statistically significant, as in the case of Finland. The evidence that, in no country except Finland, training significantly decreases the quit rate is suggestive of under-provision. The authors suggest that policies which aim at increasing the level of training above the market level should be designed to affect either supply or demand, or both.

Selected papers from the conference are indexed from TD/TNC 87.81 to TD/TNC 87.84. Show less

Using a unique survey on employees at manufacturing firms in Thailand and the Philippines, we develop and estimate a canonical model of training investment and returns to training in earnings. Our estimated model disentangles complex and strong mutual interactions among training incidence, impact on the earnings, and the cost of training. Major findings are summarised as follows: (1) both on-the-job (OJT) and off-the-job (OFFJT) trainings significantly increase future earnings in Thailand. Our estimate suggests that an increase of OJT by one standard deviation from the population mean will permanently raise earnings by 1-5% whereas the corresponding impact by OFFJT is roughly 1.5%. Our provisional estimate for the Philippines is much higher for total training hours, in the order of 6 to 7%, suggesting the hidden inefficiency or hindrance to the training investment; (2) in Thailand, [the] marginal cost of OJT training is significantly higher for the highly educated as the primary cost of training is the opportunity cost, whereas the better educated are equally more productive in learning (from training) as in production; (3) employment stability significantly increases both marginal benefit and investment in training in Thailand; (4) in Thailand, the estimated impact of education on training [is] positive. The impact is larger for OFFJT than OJT; [and] (5) the survey data in the Philippines indicate anomalous characteristics in many dimensions of the earnings and trainings.

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