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The return to firm investment in human capital

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  • Almeida, Rita
  • Carneiro, Pedro

Abstract

In this paper the authors estimate the rate of return to firm investments in human capital in the form of formal job training. They use a panel of large firms with unusually detailed information on the duration of training, the direct costs of training, and several firm characteristics such as their output, workforce characteristics, and capital stock. Their estimates of the return to training vary substantially across firms. On average it is -7 percent for firms not providing training and 24 percent for those providing training. Formal job trainingis a good investment for many firms and the economy, possibly yielding higher returns than either investments in physical capital or investments in schooling. In spite of this, observed amounts of formal training are small.

Suggested Citation

  • Almeida, Rita & Carneiro, Pedro, 2006. "The return to firm investment in human capital," Policy Research Working Paper Series 3851, The World Bank.
    • Handle: RePEc:wbk:wbrwps:3851
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    More about this item

    Keywords

    Primary Education; Education For All; Access&Equity in Basic Education; Tertiary Education; Economic Theory&Research;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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