Working Paper No. 455

Cost and Productivity Effects of Firm Financed Training

Published: April 1996Pages: 47Keywords: ENTERPRISES; TRAINING; WORKERS; PRODUCTIVITYJEL-codes: C51; D21; J24; J31

Cost and Productivity Effects of Firm Financed Training Eugenia Kazamaki Ottersten, Thomas Lindh and 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.

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Martin Ljunge, IFN, is the author of a chapter, "Trust promotes health: addressing reverse causality by studying children of immigrants", in a new book edited by Sherman Folland and Eric Nauenberg. The cutting edge of research is presented, covering the ever-expanding social capital field.

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