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Competition, Institutions and Company-sponsored Training

Tina Hinz and Jens Mohrenweiser ()
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Tina Hinz: Friedrich-Alexander University Erlangen-Nuernberg

No 162, Economics of Education Working Paper Series from University of Zurich, Department of Business Administration (IBW)

Abstract: The new training literature argues that imperfect labour markets (i.e. less competition) lead to an increasing productivity-wage wedge. We show that this relation does not hold for all institutional and market environments. We use representative establishment panel data for Germany and apply a control function approach for estimating the production function to correct for endogeneity in input factors. We show that the skill-productivity gradient responds stronger to increases in product market competition and labour market density than the skill-wage gradient. This leads to an increasing productivity-wage wedge in more competitive environments. Similarly, works councils have a stronger effect on the skill-productivity than on the skill-wage gradient while both gradients are similar in the presence of union wage bargaining. Our results call for a more nuanced interpretation of the exposition of the new training literature to understand company-sponsored training across institutional and market environments.

Keywords: training; productivity; wages; wage compression (search for similar items in EconPapers)
JEL-codes: J24 M53 R23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-lma
Date: 2019-06
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