The return to firm investments in human capital

In this paper the authors estimate the rate of return to firm investments in human capital in the form of formal job training. The authors use a panel of large firms with detailed information on the duration of training, the direct costs of training, and several firm characteristics. The authors estimate of the return to training are substantial (8.6 percent) for those providing training. Results suggest that formal job training is a good investment for these firms possibly yielding comparable returns to either investments in physical capital or investments in schooling. The paper proceeds as follows. Section two describes the data the authors use. In section three, the authors present basic framework for estimating the production function and the cost function. In section fourth the authors present empirical estimates of the costs and benefits of training and compute the marginal internal rate of return for investments in training. Finally, section fifth concludes.