The Impact of Training on Productivity and Wages: Evidence from British Panel Data*

Dearden, Lorraine; Reed, Howard; Reenen, John Van

doi:10.1111/j.1468-0084.2006.00170.x

Cited by 379 publications

(337 citation statements)

References 51 publications

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“…This finding is somewhat different from most previous literature that compares the effects of training on firms and workers (Conti 2005;Ballot et al 2006;Dearden et al 2006) that has found stronger evidence of positive effects on organizational performance rather than on wages.…”

Section: Discussioncontrasting

confidence: 56%

“…This applies both to industry levels studies (Conti 2005;Dearden et al 2006) and firm level studies (e.g. Ballot et al 2006).…”

Section: Introductionmentioning

confidence: 99%

“…Acemoglu and Pischke (1999) and Booth and Zoega (2004). 3 evidence on the impact of training on wages and productivity finds that there is a wedge between wages and productivity effects and that employees and employers seem to share the benefits from training. This applies both to industry levels studies (Conti 2005;Dearden et al 2006) and firm level studies (e.g. Ballot et al 2006).…”

mentioning

confidence: 99%

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The effects of general and firm-specific training on wages and performance: evidence from banking

Jones

Kalmi

Kauhanen

2011

Oxford Economic Papers

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By using new panel data for Finnish banks we study the impact of training on wages and performance. To the best of our knowledge, ours is the first paper to compare explicitly the effects of general and firm-specific workplace training on outcomes for both employees and firms. Unlike much existing literature, we find stronger evidence that training improves worker outcomes rather than organizational performance. Depending upon specification, the estimated wage elasticity with respect to training is in the range of 3-7%, whereas the performance effects vary widely depending on the measures of training intensity. The other key finding is that general training is associated with higher wage and performance effects than is firm-specific training. 2 I IntroductionTwo important issues are raised in most economic studies of training. First, does training increase efficiency and by how much? Second, who reaps the gains from training? In addressing these issues, the standard (Beckerian) theory concludes that in competitive markets, employers will not pay for general training. By definition, general training increases employee productivity by the same amount in the current workplace and elsewhere. If employees participate in general training, their employers have to bid up employees' wages reflecting the productivity increases due to training. If they fail to do so, other potential employers can "poach" these workers and free-ride in training expenses. Hence, according to this theory, in competitive labour markets, employers would finance training only if there are some specific elements in it. By contrast, the early empirical evidence on training revealed that employer-provided training is mostly general in nature and that, nevertheless, employers paid the costs of training (e.g. Lynch 1992; Spletzer, 1998, 1999;Barron et al. 1999).To explain this inconsistency between theory and empirics, many subsequent theorists point to imperfections in labour markets. It is argued (e.g. Acemoglu and Pischke, 1999;Manning, 2003) that search frictions, certain labour market institutions (e.g. unions, minimum wages), imperfect competition in small labour markets (Stevens 1994), or asymmetric information in training among current and potential employers may lead to situations where employees capture only a fraction of the productivity gains.These models also imply that wages do not equal marginal revenue product, and this has motivated recent literature that studies the impact of training on productivity and wages 1 .Consistent with theory grounded in imperfect labour markets, more recent empirical 1 For theoretical literature see e.g. Acemoglu and Pischke (1999) and Booth and Zoega (2004). 3 evidence on the impact of training on wages and productivity finds that there is a wedge between wages and productivity effects and that employees and employers seem to share the benefits from training. This applies both to industry levels studies (Conti 2005;Dearden et al. 2006) and firm level studies (e.g. Ballot et al. 2006). However, w...

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Section: Discussioncontrasting

confidence: 56%

“…This applies both to industry levels studies (Conti 2005;Dearden et al 2006) and firm level studies (e.g. Ballot et al 2006).…”

Section: Introductionmentioning

confidence: 99%

mentioning

confidence: 99%

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The effects of general and firm-specific training on wages and performance: evidence from banking

Jones

Kalmi

Kauhanen

2011

Oxford Economic Papers

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“…In addition, the financial strength of the firm leads to productivity improvement (Dearden et al, 2006). To control for this issue, we used information on firms' earnings before interest, taxes, and depreciation.…”

Section: Earningsmentioning

confidence: 99%

Environmental standards and labor productivity: Understanding the mechanisms that sustain sustainability

2012

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Summary In the last decade, a rising number of firms have adopted voluntary international environmental management and product standards, such as the international ISO 14001 management standard or organic certification. Although emerging research analyzes the impact of these standards on environmental and financial performance, there is to our knowledge no empirical research on how they affect the productivity of employees. In this paper, we investigate the direct relationship between environmental standards and labor productivity, as well as two mediating mechanisms through which environmental standards influence labor productivity: employee training and enhanced interpersonal contacts within the firm. Our empirical results, based on a French employer–employee survey from 5220 firms, reveal that firms that have adopted environmental standards enjoy a one standard deviation higher labor productivity than firms that have not adopted such standards. Copyright © 2012 John Wiley & Sons, Ltd.

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“…Our estimated coefficients on the other hand indicate that an improvement by one health category increases wages by 7%. Previous findings on the relationship between on-the-job-training and wages by Dearden et al (2006) show that a 1% point increase in training is associated with an increase in hourly wages of about 0.3%. Parameter values for our development accounting exercise are based on estimated coefficients from our preferred specification, see Table 4.…”

Section: Parametrizationmentioning

confidence: 99%

Development accounting using PIAAC data

Hidalgo-Cabrillana

Kuehn

Lopez-Mayan

2017

SERIEs

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We carry out a classical development accounting exercise using data from the "Programme for the International Assessment of Adult Competencies" (PIAAC). PIAAC data, available for 30 upper-middle and high-income countries and nationally representative for the working-age population, allow us to construct a multidimensional measure for the stock of human capital in each country, taking into account years of schooling, job experience, cognitive skills, on-the-job-training, and health. Individual level PIAAC data for the US are then used to estimate the weight of each dimension in the human capital composite by running Mincerian wage regressions. We find that differences in physical capital together with our broad measure of human capital account for 42% of the variance in output per worker, compared to only 27% when proxying human capital by average years of schooling only. Differences in cognitive skills play the largest role while experience and health are of lesser importance.Financial support from the Spanish Ministry of Science and Innovation through Grant ECO2013-44920-P is gratefully acknowledged. We would also like to thank an anonymous referee for his or her insightful comments.

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The Impact of Training on Productivity and Wages: Evidence from British Panel Data*

Cited by 379 publications

References 51 publications

The effects of general and firm-specific training on wages and performance: evidence from banking

The effects of general and firm-specific training on wages and performance: evidence from banking

Environmental standards and labor productivity: Understanding the mechanisms that sustain sustainability

Development accounting using PIAAC data

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