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The impact of training on productivity and wages: evidence from British panel data

Lorraine Dearden (), Howard Reed and John van Reenen ()

Economic History Working Papers from London School of Economics and Political Science, Department of Economic History

Abstract: It is standard in the literature on training to use wages as a sufficient statistic for productivity. But there are many reasons why wages and productivity may diverge. This paper is part of a smaller literature on the effects of work-related training on direct measures of productivity. We construct a panel of British industries between 1983 and 1996 containing training, productivity and wages. Using a variety of econometric estimation techniques (including system GMM) we find that training is associated with significantly higher productivity. Raising the proportion of workers trained in an industry by one percentage point (say from the average of 10% to 11%) is associated with an increase in value added per worker of about 0.6% and an increase in wages of about 0.3%. Furthermore, we find that the magnitude of the impact of training on wages is only half as large as the impact of training on productivity, implying that the existing literature has underestimated the importance of training. We also show evidence using complementary datasets (e.g. from individuals) that is suggestive of externalities of training and imperfect competition.

Keywords: Productivity; training; wages; panel data. (search for similar items in EconPapers)
JEL-codes: C23 D24 J31 (search for similar items in EconPapers)
Date: 2005-02
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http://eprints.lse.ac.uk/779/ Open access version. (application/pdf)

Related works:
Journal Article: The Impact of Training on Productivity and Wages: Evidence from British Panel Data (2006) Downloads
Working Paper: The Impact of Training on Productivity and Wages: Evidence from British Panel Data (2005) Downloads
Working Paper: The impact of training on productivity and wages: evidence from British panel data (2005) Downloads
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