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Effects of state-sponsored human capital investment on the selection of training type

Izumi Yokoyama, Naomi Kodama and Yoshio Higuchi

Japan and the World Economy, 2019, vol. 49, issue C, 40-49

Abstract: Since the 1990s, firms in Japan have reduced their human capital investment in the workplace to minimize costs. Moreover, in response to the increase in the number of non-regular employees and turnover rates, workers need to have greater incentive to make the self-motivated investment in themselves for their self-protection. In this study, we first estimate the effects of workers’ self-motivated investment in themselves on wage rates. Next, we explore who is likely to participate in which training type and accordingly estimate the effects of the self-motivated investment on wage rates by training type. Our estimates controlling for individual-level fixed-effects indicate that the return is significantly positive and particularly high for practical training related to workers’ current jobs, and regular workers tend to self-select these higher-returns programs, while non-regular workers are more likely to enroll in lower-returns programs, such as schooling. This trend in investment in oneself could potentially increase the wage inequality between regular and non-regular workers through the self-selection of training types. Our estimates reveal that receiving the training and education benefit raises the likelihood for workers to participate in a high-return training program regardless of whether they are non-regular or regular workers. This suggests that government benefits on self-investment change workers’ self-selection of training type and serve to promote practical trainings that lead to high returns.

Keywords: Training and education benefits; Wage rates; Human capital; Self-investment (search for similar items in EconPapers)
JEL-codes: J33 J38 J24 H20 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.japwor.2018.07.003

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