Effects of State-Sponsored Human Capital Investment on the Selection of Training Type

Naomi Kodama, Izumi Yokoyama () and Yoshio Higuchi

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

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.

Pages: 23 pages
Date: 2018-05
New Economics Papers: this item is included in nep-hrm
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Effects of state-sponsored human capital investment on the selection of training type (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:18029

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