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Does Availability of Educated Workers Increase Enterprise Training?

Guest post by: OECD Development Centre

Article Overview: A number of studies have addressed the issue of whether educated employees are more likely to receive enterprise training. Since productivity gains of training activities among educated workers are expected to be higher, firms with a higher proportion of educated workforce are more likely to provide training.

Does Availability of Educated Workers Increase Enterprise Training?

A number of studies have addressed the issue of whether educated employees
are more likely to receive enterprise training. Since productivity gains of training activities
among educated workers are expected to be higher, firms with a higher proportion of
educated workforce are more likely to provide training. Much empirical evidence supports
this. Tan and Batra (1996) show that firms with high mean years of education are more
likely to provide training in Colombia, Mexico and Malaysia. Tan and Lopez-Acevedo
(2003) and Zeufack (1999) show that firms with a higher proportion of educated workers
are more likely to provide training.
However, this does not necessarily imply that firms, faced with an abundant
supply of educated workers, would train more. Indeed the WBES indicates that as many
as 44 per cent of firms in LAC and 21 per cent of firms in East Asia provide less or no
training due to the availability of skilled workers in the labour market. Miyamoto and Todo
(2003) further confirm this by showing, after controlling for endogeneity of average
workers education variable, that firms in Indonesia substitute training by hiring more
educated workers.
This has an important policy implication since these findings indicate that simply
expanding educational attainment may reduce firm’s incentives to provide training.

OECD DEVELOPMENT CENTRE
Working Paper No. 211
HUMAN CAPITAL FORMATION
AND FOREIGN DIRECT INVESTMENT
IN DEVELOPING COUNTRIES
by
Koji Miyamoto

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Article Tags: abundant supply, acevedo, developing countries, east asia, educational attainment, empirical evidence, endogeneity, foreign direct investment, human capital formation, implication, important policy, incentives, indonesia, koji miyamoto, labour market, oecd development centre, productivity gains, proportion, skilled workers, workforce



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