The Return to the Firm Investment in Human Capital

Rita Almeida () and Pedro Carneiro ()

No 1937, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: In this paper we estimate the rate of return to firm investments in human capital in the form of formal job training. We use a panel of large firms with unusually detailed information on the duration of training, the direct costs of training, and several firm characteristics such as their output, workforce characteristics and capital stock. Our estimates of the return to training vary substantially across firms. On average it is -7% for firms not providing training and 24% for those providing training. Formal job training is a good investment for many firms and the economy, possibly yielding higher returns than either investments in physical capital or investments in schooling. In spite of this, observed amounts of formal training are very small.

Keywords: on-the-job training; panel data; production function; rate of return (search for similar items in EconPapers)
JEL-codes: C23 D24 J31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn and nep-hrm
Date: Written
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