Abstract
Skills shortages and skill mismatch are a pressing concern for policymakers in several developing countries, and in East Asia specifically. Providing on-the-job training can be an effective policy tool to shape the skills of the existent workforce to the specific needs of the firms. This paper explores a unique data set of matched employer-employee data for Malaysia and Thailand to estimate the wage return to on-the-job training in these two countries. Exploring propensity score matching estimates, we show that the average wage returns to on-the-job training are 7.7% for Malaysia and 4.5% for Thailand. Furthermore, we find evidence that the wage returns to on-the-job training are higher for males than for females in Malaysia and that, for both countries, returns are higher for workers with at least secondary education.
Highlights
Many economists have emphasized the importance of human capital accumulation for growth (e.g. Lucas, 1988; Romer, 1990; Aghion-Howitt, 1998)
Our findings show that the wage returns to the investment in job training decrease significantly as one controls for worker’s and firm’s characteristics
We find that on-the-job training is associated with increases in individual wages of 7.7% in Malaysia and 4.5% in Thailand
Summary
Many economists have emphasized the importance of human capital accumulation for growth (e.g. Lucas, 1988; Romer, 1990; Aghion-Howitt, 1998). This paper explores a matched employer-employee data set with unique information on formal firms and their workers for two developing countries with very different levels of development, Malaysia and Thailand1.
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