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Working Paper No. 455

Cost and Productivity Effects of Firm Financed Training

Working Paper
Kazamaki Ottersten, Eugenia, Thomas Lindh and Erik Mellander (1996). “Cost and Productivity Effects of Firm Financed Training”. IFN Working Paper No. 455. Stockholm: Research Institute of Industrial Economics (IFN).

Eugenia Kazamaki Ottersten, Thomas Lindh, Erik Mellander

A quality-adjusted specification of labor is suggested which allows firm training to affect labor efficiency. To assess the cost and productivity effects, this specification is integrated into a flexible neoclassical cost function. The empirical analysis uses panel data for eight plants in the Swedish Machine Tool Industry. The econometric results imply a high probability that training expenditures result in net decreases in total costs. Judging from the corresponding point estimates, these cost savings can be very large. The estimates of productivity effects are also positive, albeit rather small.