Productivity, wages and the returns to firm-providing training: who is grabbing the biggest share?

Ana Lopes 1, Paulino Teixeira2
1Instituto Politécnico de Leiria, Portugal, 2GEMF, Faculdade de Economia, Universidade de Coimbra, Portugal

In spite of the importance of workplace training in human capital accumulation, relatively little is known on its returns for workers and firms. Our investigation tries to fill this gap by developing an alternative modelling that examines the determinants of firm productivity and wages, on the one hand, and the internal rate of return to firm training investments, on the other. Our estimates, obtained using a firm-level dataset in which we have detailed information on firm-provided training, indicate that an additional hour of training per worker implies a 0.09% increase in productivity. We also found that 2/3 of the gains in productivity are captured by firms and 1/3 by workers. In turn, the internal rate of return for an average firm in our sample is equal to 11%, while for workers it is considerably higher at 22%. As expected, the dispersion across firms is very high, with 70% of firms having a positive internal rate of return for an annual depreciation rate of 35%.

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