Market Imperfections and Firm-Sponsored Training

M. Picchio, J.C. van Ours

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Recent human capital theories predict that labor market frictions and product market competition influence firm-sponsored training. Using matched worker-firm data from Dutch manufacturing, our paper empirically assesses the validity of these predictions. We find that a decrease in labor market frictions significantly reduces firms’ training expenditures. Instead, product market competition does not have an effect on firm-sponsored training. We conclude that increasing competition through international integration and globalization does not pose a threat to investments in on-the-job training. An increase in labor market flexibility may reduce incentives of firms to invest in training, but the magnitude of this effect is small.
Original languageEnglish
Place of PublicationTilburg
Number of pages24
Publication statusPublished - 2010

Publication series

NameCentER Discussion Paper


  • firm-sponsored training
  • labor market frictions
  • product market competition
  • matched worker-firm data


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