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The return to firm investment in human capital

Authors: Rita Almeida and Pedro Carneiro
Date: 01 January 2009
Type: Journal Article, Labour Economics, Vol. 16, No. 1, pp. 97-106

Abstract

In this paper we estimate the rate of return to firm investments in human capital in the form of formal job training. We use a panel of large firms withun usually 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. Our estimates of the return to training vary substantially across firms. On average it is - 7% for firms not providing training and 24% for those providing training. Formal job training is a good investment for many firms and the economy, possibly yielding higher returns than either investments in physical capitalor investments in schooling. In spite of this, observed amounts of formal training are very small.

Previous version:
Rita Almeida and Pedro Carneiro December 2005, The return to firm investment in human capital, cemmap Working Paper, CWP21/05

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