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Investing in formal on-the-job training: are SMEs lagging much behind?

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  • Rita Almeida
  • Reyes Aterido

Abstract

In a modern economy, the investment in human capital by firms is crucial to foster technological adoption and foster productivity growth. This paper analyzes the correlation between firm size and the investment in job training by employers. Using a large firm level data set across 99 developing countries, we show that a strong and positive correlation in the investment in job training and firm size is a robust statistical finding both within and across countries with very different institutions and levels of development. Even though we cannot fully disentangle correlation from causality, we show that the size-training gap is not fully explained by differences across firms in market imperfections or institutional failures impeding the development of smaller firms. Our findings call for the urgency of collecting better panel data sets to understand how cost-effective are on-the-job training programs in fostering firm productivity and growth in developing countries. Jel codes: J24, D24 Copyright Almeida and Aterido; licensee Springer. 2015

Suggested Citation

  • Rita Almeida & Reyes Aterido, 2015. "Investing in formal on-the-job training: are SMEs lagging much behind?," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-23, December.
    • Handle: RePEc:spr:izaldv:v:4:y:2015:i:1:p:1-23:10.1186/s40175-015-0029-3
    DOI: 10.1186/s40175-015-0029-3
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    2. Olga Kupets, 2018. "Employer‐provided training, innovation and skills in post‐Soviet countries," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 26(4), pages 725-768, October.
    3. Del Carmen María & Vásquez-Torres, 2018. "Factorial analysis of the elements that compose the training in the small and medium enterprises of the Industrial sector," Management, Sciendo, vol. 22(2), pages 42-59, December.
    4. Miguel Jaramillo & Bruno Escobar, 2022. "Employment protection legislation and on-the-job training in an informal labor market: Evidence from Peru," Working Papers 184, Peruvian Economic Association.
    5. Konstantinos Angelopoulos & Andrea Benecchi & Jim Malley, 2017. "Can Subsidising Job-Related Training Reduce Inequality?," CESifo Working Paper Series 6605, CESifo.
    6. Kupets, Olga, 2018. "Investment in human capital in post-Soviet countries: Why are firms not training more?," CEI Working Paper Series 2017-7, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    7. Henrik Hansen & S. Kanay De & John Rand & Neda Trifković, 2023. "Wage returns to workplace training in Myanmar," Development Policy Review, Overseas Development Institute, vol. 41(2), March.
    8. Henrik Hansen & S Kanayade & John Rand & Neda Trifkovic, 2021. "Workplace training in Myanmar: Determinants and wage returns," DERG working paper series 21-10, University of Copenhagen. Department of Economics. Development Economics Research Group (DERG).
    9. Spyridon Boikos & Mehmet Pinar & Thanasis Stengos, 2023. "Bribery, on-the-job training, and firm performance," Small Business Economics, Springer, vol. 60(1), pages 37-58, January.
    10. Konstantinos Angelopoulos & Andrea Benecchi & James Malley, 2017. "Can subsidising job-related training reduce inequality?," Working Papers 2017_10, Business School - Economics, University of Glasgow.
    11. Nina Torm, 2024. "Training Returns Among Informal Workers: Evidence from Urban Sites in Kenya and Tanzania," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 36(6), pages 1593-1615, December.

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