Policies to increase workers skills

Different training policies can serve different objectives. Institutional arrangements to foster cost-sharing can efficiently increase access to formal, accredited and well-recognised training with little burden for the public budget. Co-financing policies that increase the incentive for firms might reduce the possible impact of market failures on aggregate training provision and can be easily financed through specific corporate levies. However, these policies cannot reach those groups that are less likely to receive employer-sponsored training. In this case, co-financing policies targeted to individual demand might become necessary. However, these policies are expensive and might result in substantial waste of public resources if they are not accompanied by interventions to reduce imperfections in the training market.Design is, however, crucial, and it is possible to identify some general principles concerning the desirable characteristics of training policies. Yet, too little is known on their relative efficiency with respect to other potential instruments, due to lack of rigorous evaluation analysis. Hence, taking also into account the methodological complexity of ex-post assessment in this area, evaluation mechanisms should be included into policy design to ensure timely corrections of policy mistakes.training policy

Improving skills for more and better jobs?

I use data from the ECHP to assess the effects of adult training on individual labour market performance. Although I find that employee training has a clear impact on wage growth only in the case of young or highly educated employees, it appears to have a stronger impact on employment security in the case of both older and low-educated workers. The contradiction is only apparent since, as standard in the literature, training wage premia are estimated on a censored sample including only employed workers. Due to the existence of downward wage rigidity, one can expect that those workers who are unable to maintain their productivity (due, for instance, to skill obsolescence) are more frequently laid–off and thereby excluded from our sample. Once foregone income due to unemployment spells is taken into account, it can be concluded that training positively affects earnings at any age and level of educational attainment. In spite of these high ex post private return, pervasive market failures justify a pro-active approach to training policy. I argue that co-financing arrangements — under which governments, employers and/or employees jointly finance training — can better leverage the required resources to upgrade the competences of those in employment. Co-financing schemes, if carefully designed, seem to be potentially effective in reducing under-provision of training — both overall and for specific groups — in a way that minimises deadweight losses, although specific programmes for the unemployed or the inactive might require full government funding.Training; wages; job security; training policy; ECHP

Solving the Training Divide

The information society is all very well, but the trouble is ensuring everyone can be trained up for it, especially those who need it most. Countries still do not appear to invest enough in the education of under-skilled adults, although the extent of the problem is difficult to quantify and may be eased somewhat by the presence of informal training. Still, more needs to be done to encourage a more efficient sharing of the costs and benefits of training between employers and employees, thereby increasing the incentives to invest in human capital. Another, more intractable problem, is how to get training to those who need it most. As it is, vulnerable workers have fewer opportunities to acquire new skills. For this reason, some countries are experimenting with co-financing policies for individual investments in human capital, to help workers pay for training themselves when they are not supported by their employer. Despite these measures, without support from their employer, individuals often find training courses unaffordable, not only because of their direct costs but also because of time constraints.demand for skills; training; co-financing; time constraints

The Driving Forces of Economic Growth: Panel Data Evidence for the OECD Countries

This paper discusses links between policy settings, institutions and economic growth in OECD countries on the basis of pooled cross-country time-series regressions. The novel econometric approach used in the paper allows short-term adjustments and convergence speeds to vary across countries, in accordance with most theoretical models, while imposing restrictions only on the long-run coefficients. In addition to the "primary" influences of physical and human capital accumulation, the results confirm the importance for growth of R&D activity, the macroeconomic environment, trade openness and well developed financial markets. They also confirm that many of the policy influences operate not only via the overall efficiency of factor use but also indirectly via the mobilisation of resources for fixed investment.Growth; Institutions

Barriers to Entry, Deregulation and Workplace Training: A Theoretical Model with Evidence from Europe

We study the impact of barriers to entry on workplace training. Our theoretical model indicates that there are two contrasting effects of deregulation on training. With a given number of firms, deregulation reduces the size of rents per unit of output that firms can reap by training their employees. Yet, the number of firms increases, thereby raising output and profit gains from training and improving investment incentives. The latter effect always prevails. Our empirical analysis, based on repeated cross-section data from 15 European countries and 12 industries, confirms the predictions of the model and shows that deregulation increases training incidence.training, product market competition, Europe

How do firms' and individuals' incentives to invest in human capital vary across groups?

Past research shows that training opportunities are unequally distributed across workers, with workers who are already in a better position in the labour market having more opportunities to acquire new skills. We decompose the downstream training market in order to trace the extent to which differences in the provision of employer-sponsored training across groups of workers are due to demand (by employees) or supply (by employers). The empirical results suggest that employers tend to exclude women, immigrants, young employees, involuntary part-time and temporary workers, workers in low-skilled occupations and workers with low literacy, when selecting which employees to train. By contrast, lower demand appears to account for lower training participation of older and less educated workers. In the case of older workers, labour market imperfections affecting the distribution of training benefits and the length of employers' and employees' pay-back periods are likely to be behind this pattern. In the case of less educated workers, credit constraints and/or training market imperfections – due to lack of training information and contractibility between employers and employees – may partially explain this finding. However, noneconomic factors, such as lesser motivation or bad pedagogical experiences, must also be taken into account. Finally, demand does not appear to vary with firm size or sector. However, supply rises with firm size, perhaps due to lower unit costs of training, larger benefits, and greater access to credit and information for large firms.training inequalities; training demand; training supply;

The Determinants of Unemployment across OECD Countries

This paper explores the impact of policies and institutions on unemployment in OECD countries over the past decades. Reduced-form unemployment equations, consistent with standard wage setting/price-setting models, are estimated using cross-country/time-series data from 21 OECD countries over the period 1982-2003. In the “average” OECD country, high and long-lasting unemployment benefits, high tax wedges and stringent anti-competitive product market regulation are found to increase aggregate unemployment. By contrast, highly centralised and/or coordinated wage bargaining systems are estimated to reduce unemployment. These findings are robust across specifications, datasets and econometric methods. The paper also finds evidence of interactions across policies and institutions, as well as between institutions and shocks. Some specific interactions across policies and institutions are found to be particularly robust, notably between unemployment benefits and public spending on active labour market programmes as well as between statutory minimum wages and the tax wedge. Finally, it is shown that macroeconomic conditions also matter for unemployment patterns, with their impact being shaped by policies.unemployment; institutions; shocks

Competing Technologies, Technological Monopolies and the Role of Convergence to a Stable Market Structure

Empirically the diffusion of competing technologies most often displays either "lock-in" to a quasi-monopoly or apparent turbulence but rarely stable market-sharing. In contrast with widespread views, we show that, first, unbounded increasing returns are neither necessary nor sufficient to lead to technological monopolies. Rather, asymptotic patterns depend on the relative impact of increasing returns and the degree of adopters heterogeneity. Second, the unlikely empirical occurence of stable market-sharing is slower then to monopoly; thus, in the former case, the enviroment often changes before the market-share trajectory becomes stable.Competing Technologies, Product Selection, Unbounded Returns, Network Externalities, Heterogeneity, Technological Monopolies

Looking Inside the Perpetual-Motion Machine: Job and Worker Flows in OECD Countries

There is an increasing interest in the process of job creation and destruction as well of hirings and separations. Many studies suggest that idiosyncratic firm-level characteristics shape both job and worker flows in a similar way in all countries. Others argue that cross-country differences in terms of gross job flows are minor. However, these statements are usually based on the comparison of national estimates, typically collected on the basis of different definitions and collection protocols. By contrast, in this paper, we use cross-country comparable data on both job and worker flows to examine key determinants of these flows and of their cross-country differences. We find that idiosyncratic firm (industry, firm age and size) and worker (age, gender, education) characteristics play an important role for both gross job and worker flows in all countries. Nevertheless, in contrast with part of the literature, we find that, even controlling for these factors, cross-country differences concerning both gross job and worker flows appear large and of a similar magnitude. Both job and worker flows in countries such as the United States and the United Kingdom exceed those in certain continental European countries by a factor of two. Moreover, the variation of worker flows across different dimensions is well explained by the variation of job flows, suggesting that, to a certain extent, the two flows can be used as substitutes in cross-country analysis. Consistently, churning flows, that is flows originating by firms churning workers and employees quitting and being replaced, display much less cross-country variation.job creation, job destruction, hirings, separations, churning flows, cross-country differences

Is Training More Frequent When the Wage Premium Is Smaller ?

According to Becker [1964], when labour markets are perfectly competitive, general training is paid by the worker, who reaps all the benefits from the investment. Therefore, ceteris paribus, the greater the training wage premium, the greater the investment in general training. Using data from the European Community Household Panel, we compute a proxy of the training wage premium in clusters of homogeneous workers and find that smaller premia induce greater incidence of off-site training, which is likely to impart general skills. Our findings suggest that the Becker model provides insufficient guidance to understand empirical training patterns. Conversely, they are not inconsistent with theories of training in imperfectly competitive labour markets, in which firms may be willing to finance general training if the wage structure is compressed, that is, if the increase in productivity after training is greater than the increase in pay.general training; off-site training; training wage premia; wage compression; ECHP