Market imperfections and firm-sponsored training

Abstract

Using worker and firm data from Dutch manufacturing, our paper investigates how product market competition and labor market imperfections affect firm-sponsored training. We find that product market competition does not affect the firms' training expenditures. Increasing competition, for instance due to increased international integration and globalization, is not a threat to investments in on-the-job training. Instead, labor market imperfections influence firm-sponsored training. An increase in labor market flexibility significantly reduces the incentives of firms to invest in training. The magnitude of this effect is nevertheless small.