Employer-provided Training and Productivity: Evidence from a panel of Japanese firms

Author Name MORIKAWA Masayuki (Vice President, RIETI)
Creation Date/NO. June 2018 18-J-021
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This study presents evidence on the quantitative relationship between employer-provided training (Off-JT) and productivity among Japanese firms. The important contributions of this study are its construction of a panel of training stock at the firm level, distinction between manufacturing and service firms, and comparison of relative contribution of training on productivity and wages. The results indicate, first, that training significantly contributes to the labor productivity of the firm. Second, the estimated elasticity of productivity with respect to training stock is greater for service firms than manufacturing firms. Third, the elasticities of productivity and wages to training stock are similar in size, meaning that the returns to firms' training investments are shared by their workers proportional to the wage share of the value added. These results suggest that policies to promote firms' training investments have the potential to improve productivity and wages, particularly of firms in the service industries.