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Why is the Return to Training So High?

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  • Pål Schøne

Abstract

. Cross‐sectional results show that training increases wages by 5 per cent. This return is on a par with the return to 1 year of education. Considering that the average duration of training is very short, this result is strange and needs further examination. After leaving out the importance of measurement error, we control for accumulated stock of firm‐specific skills, unobserved heterogeneity in wage levels, heterogeneity in training returns, and heterogeneity in wage growth. By this we manage to reduce the return considerably. Unobserved heterogeneity in wage levels is the most important contributor to the ‘too high’ returns to training.

Suggested Citation

  • Pål Schøne, 2004. "Why is the Return to Training So High?," LABOUR, CEIS, vol. 18(3), pages 363-378, September.
    • Handle: RePEc:bla:labour:v:18:y:2004:i:3:p:363-378
    DOI: 10.1111/j.1121-7081.2004.00275.x
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    References listed on IDEAS

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    1. Picchio, Matteo & van Ours, Jan C., 2013. "Retaining through training even for older workers," Economics of Education Review, Elsevier, vol. 32(C), pages 29-48.
    2. Görlitz, Katja, 2011. "Continuous training and wages: An empirical analysis using a comparison-group approach," Economics of Education Review, Elsevier, vol. 30(4), pages 691-701, August.
    3. Filipe Almeida-Santos & Yekaterina Chzhen & Karen Mumford, 2010. "Employee training and wage dispersion: white- and blue-collar workers in Britain," Research in Labor Economics, in: Jobs, Training, and Worker Well-being, pages 35-60, Emerald Group Publishing Limited.
    4. Burgard, Claudia & Görlitz, Katja, 2011. "Continuous Training, Job Satisfaction and Gender – An Empirical Analysis Using German Panel Data," Ruhr Economic Papers 265, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    5. Siang, Liew & Noor, Zulridah, 2015. "The Impact of Training on the Conditional Wage Distribution in Selected Service Subsectors in Malaysia," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 49(1), pages 37-48.
    6. Bassanini, Andrea & Brunello, Giorgio, 2008. "Is training more frequent when the wage premium is smaller? Evidence from the European Community Household Panel," Labour Economics, Elsevier, vol. 15(2), pages 272-290, April.

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