Labour Economics 12 (2005) 557 576

www.elsevier.com/locate/econbase

Training, productivity and wages in Italy

Gabriella Conti*
Department of Economics and Institute for Social and Economic Research, University of Essex,
Wivenhoe Park, Colchester CO43SQ, United Kingdom

Abstract
This paper presents for the first time panel evidence on the productivity and wage effects of
training in Italy. It is based on an original dataset which has been created aggregating individual-level
data on training with firm-level data on productivity and wages into an industry panel covering all
sectors of the Italian economy for the years 19961999. I use several modelling specifications and a
variety of panel data techniques to argue that training significantly boosts productivity. However, no
such effect is uncovered for wages. This seems to suggest that firms do actually reap more of the
returns.
D 2005 Elsevier B.V. All rights reserved.
JEL classification: C23; J24; J31
Keywords: Training; Productivity; Wages

1. Introduction
Between 1995 and 2002, the annual growth rate of hourly labour productivity in
manufacturing has been 4.5% in the US, 4.6% in France, 2.4% in Germany and only 0.9%
in Italy (OECD, 2002). The Governor of the Bank of Italy, Antonio Fazio, in his bFinal
ConsiderationsQ of this years Report to the annual General Meeting, has urged immediate
policy responses to stop the loss of competitiveness suffered by the Italian system. One of
the key factors behind such a bproductivity gapQ has long been recognized in the lack of
ability of the Italian labour force to adapt to the everchanging needs of the global market.
* Tel.: +44 1206 874875.
E-mail address: gconti@essex.ac.uk.
0927-5371/$ - see front matter D 2005 Elsevier B.V. All rights reserved.
doi:10.1016/j.labeco.2005.05.007

558

G. Conti / Labour Economics 12 (2005) 557576

However, notwithstanding the complete redesign of the training system carried out in the
recent years, Italys performance appears highly unsatisfactory also on this ground. The
available evidence clearly shows that Italy has one of the lowest values of training
incidence in the European Union, together with other Mediterranean countries, such as
Portugal and Greece (Brunello, 2002).
These facts appear rather puzzling if analysed in the light of rigorous and sound
economic theory. The recent approach to training in imperfect labour markets (Stevens,
1994a,b,c and 1996; Acemoglu and Pischke, 1998 and 1999a,b) points to some forms of
labour market imperfections as driving a wedge between increases in wages and increases
in productivity, allowing the firms to recoup some of the costs of training, and fostering
their incentives to invest in it. This is consistent with some empirical findings which show
a lower level of on-the-job training in the US compared to Germany and Japan (Lynch,
1994). However, this is not true for Italy. Italy is on the top of ranking of regulated labour
markets, with a strong role of unions in wage bargaining, and high hiring and firing costs.
However, in sharp contrasts with the predictions of the theory, Italy is trapped in a lowtraining equilibrium.
The research presented in this paper is an attempt to shed some light on this puzzle,
testing for training effects on labour productivity and wages. Many studies have tried to
establish this link in an international context. However, no such work has been done for
Italy. Moreover, the available literature has achieved controversial results, which seem
to depend strongly on the training measure used, the modelling specifications and the
estimation techniques adopted, and the controls included in the empirical model.
Overall, the majority of the studies have found a positive impact of training on
productivity, although often not significant. In addition, some forms of training (general
training and off-the-job training) seem to have a greater effect. This study takes stock of
the available knowledge, and tries to overcome the limitations of the previous studies in
several ways.
First of all, due to the lack of longitudinal data, many studies have failed to control
for unobserved heterogeneity (Black and Lynch, 1995 and 1996), and potential
endogeneity of training (Bartel, 1994; Bishop, 1994; Barrett and OConnell, 2001);
longitudinal data with repeated training information have become available only recently
(Black and Lynch, 2001; Dearden et al., 2000; Ballot et al., 2001; Zwick, 2002). This
paper deals with both the issues of unobserved heterogeneity and endogeneity of
training, by using a variety of panel data techniques on an original dataset which
contains longitudinal information on training and measures of corporate productivity
covering all sectors of the Italian economy for the years 19961999. Coherently with the
previous literature, I show that failing to take into account these issues leads to severe
biases in the estimates.
Secondly, most of the available studies have used a flow measure of training, due to
the lack of an appropriate measure of the stock of human capital. However, measuring
training participation only over a relatively short period of time fails to take into account
the role played by skills accumulated during the working life. The richness of the
database allows me to overcome also this limitation. So, I construct a stock measure of
training, using a question which has been consistently asked over time in the Italian
Labour Force Survey.

G. Conti / Labour Economics 12 (2005) 557576

559

Thirdly, many studies have used very parsimonious specifications both in terms of the
modelling strategy adopted and in terms of the controls for firms and workers
characteristics included in the empirical model. In this paper, I use several different
specifications of the baseline model (an augmented Cobb-Douglas production function), in
order to relax the assumption of constant returns to scale and to evaluate the effect of
training on the growth of labour productivity and wages. In addition, the richness of the
database allows me to control for a plethora of firms and workers characteristics,
including another important intangible investment of the firm, namely R&D, and other
measures of workers skills, such as education. I show that the results are sensitive to the
modelling specification adopted, and that the inclusion of several controls significantly
reduces the magnitude and the level of significance of the estimated returns.
Finally, following Dearden et al. (2000), the production function estimates are explicitly
compared with the wage equations. This is important to examine how the benefits from
training are shared between the firms and the workers. The recent models of training in
imperfect labour markets predict that the benefits from training do not fully accrue to the
workers. I show that firms do indeed reap most of the returns: the main finding I obtain is
that training significantly boosts productivity, while no significant effect is uncovered for
wages. This result is robust to alternative specifications.
The outline of the paper is as follows. In Section 2 I describe the data and the variables
used for the empirical estimation. A simple empirical framework to analyze the impact of
training on productivity and wages is specified in Section 3. Section 4 is devoted to the
presentation and the discussion of the results. A section of concluding remarks and
directions for future research closes the paper.

2. The data
The empirical analysis is based on a original panel which has been created merging two
different complementary datasets. In doing so, I have followed the methodology adopted
by Dearden et al. (2000). I have used the 19961999 waves of the Italian Labour Force
Survey (April quarter), assembled with accounting data on firms for the corresponding
years, drawn from the AIDA Database. The reason for this choice relies on the fact that no
one Italian dataset contains the information on training and measures of corporate
performance required for this kind of analysis.
The first database used is the Italian Labour Force Survey. This is a household-level
survey carried out with a detailed questionnaire every quarter (in the months of January,
April, July and October) since 1959. Around 75,000 households are interviewed every
three months, for a total of approximately 200,000 individuals. From the LFS I gather
information on training, personal characteristics of the individuals (sex, age, region of
residence), measures of their skills (educational qualification and occupation), job
characteristics (hours of work) and workplace characteristics (industry sector). The
sample includes all men and women aged between 15 and 64 inclusive who were
employed at the time of the survey (including the self-employed).
Two main training questions are asked in the LFS. The first refers to courses undertaken
by the individual in the month before the interview, and has changed slightly in 1998;

560

G. Conti / Labour Economics 12 (2005) 557576

however, it was possible to build up a consistent series because the basic structure of the
question was unchanged. The question in 19961997 was: bDuring the month before the
interview, have you attended any of the following courses?Q1; then, in 19981999 it was
rephrased as: bDuring the month before the reference week, have you attended any of the
following courses or have you taken part in any of the following on-the-job training
activities?Q.2 The main drawback with this training measure is that it is a flow variable. In
order to derive a measure of the workers stock of post-schooling human capital, I have
used the answer to the second major question available in the LFS, which refers to training
received by the individual during his whole life. In 19961997 the question was: bWhat is
the highest level of vocational training achieved during your life?Q; in 19981999 it was
rephrased as: bDuring your life have you concluded a vocational training course or have
you taken part in an on-the job training activity?Q. I have used this question, combined
with the previous information on current training, to calculate the stock of post-schooling
human capital in each year.3
Most of the literature uses the current level of training to measure the stock of human
capital in the firm. However, this procedure is correct only if one assumes fully
depreciation of the skills after one period. Moreover, it is not consistent with the
underlying theory.4 Henceforth, in this paper I have followed a different procedure.
Following Boon and van der Eijken (1998), I have constructed the stock of human capital
as the sum of the proportion of workers trained at time t in industry i (the flow) and the
stock of the previous year,5 taking into account depreciation, according to the Perpetual
Inventory Method:
TRAINit FLOWit 1  dSTOCKi;t1

where y measures the depreciation rate of the human capital. Since an exact value for
y is essentially unknown, I have experimented with various rates of depreciation. The
results were not sensitive to different values, within a plausible range 5%35%, so I
1

The information collected in this question refers exclusively to courses which are connected with the current
job, or relevant for a job that the interviewed might be able to do in the future.
2
In the 19961997 questionnaire, a list of 10 courses was available; in 1998, this number was increased to 14
courses, and in 1999 two more options were added. These additions have been necessary in order to take into
account the greater range of options available, following the introduction of the reform in the training system after
the Treu Law 175/98.
3
Along with the type of courses attended, the LFS also contains additional information related to training
undertaken in the month preceding the interview, such as the scope of the course, its overall duration, the number
of weekly hours of training (only available for the years 19961997). However, the focus on the stock of
accumulated post-schooling human capital, combined with the great amount of non-response, hampered the use
of these additional questions.
4
Some papers calculate the stock of training by cumulating past flows: however, this methodology suffers from
the weakness of not having suitable initial values.
5
The availability of LFS data for 1995 (April quarter) allowed me to obtain a measure of the stock of human
capital with reliable starting values also for 1996. Moreover, I have used the answer to the question at t1 in
order to avoid double-counting: although the question refers to the training already concluded, and not still
ongoing, there is a small chance that the worker would have completed the course in the beginning of the
preceding month, hence referring to the same episode in both replies.

G. Conti / Labour Economics 12 (2005) 557576

561

have chosen a value of y = 0.15, taking the estimates derived in Groot (1998) as a
benchmark.6 Moreover, I have controlled for turnover in all the estimated specifications, in
order to take into account the loss in human capital arising from separations. It is crucial to
account for reallocation of workers across industries, since the stock measure is derived
from information on past courses, but the exact reference period is not known. Henceforth,
it could be well the case that the training course was attended while the worker was
employed in a different sector. Since I dont follow the same workers over time, I cannot
derive a proper measure of turnover at individual level; however, including controls for
inflow and outflow rates across different sectors will control for much of this problem.
Moreover, each year at least 40% of the workers interviewed reported that they had
completed a formal course in a school with duration of at least one year and release of final
certificate: henceforth, it is reasonable to believe that the training undertaken mostly
provides portable skills, which are likely to have a long-lasting impact on productivity.
Finally, given that we are most likely to see workers moving across sectors in case of wage
and productivity gains, we should see the effect of the initial training even if this training is
not directly relevant in the current job.
The second source used in this paper is AIDA (Analisi Informatizzata delle Aziende).
This is a private database,7 which provides accounting information from the balance sheets
of all Italian companies with an annual turnover higher than one million Euros.8 The
original sample contained 189,059 firms, covering a ten-year period from 1993 to 2002.
However, an accurate work of data cleaning has reduced the sample size. In the first place,
observations for years before 1996 have been excluded, due to severe reduction in the
number of firms with reported information compared to the following years: preserving
those observations would have severely affected the representativeness of the sample, due
to the fact that only information for a smaller subset of firms is available for the early
years. Secondly, the years subsequent to 1999 have been excluded, due to the impossibility
of deriving a consistent series for the training variable in the Labour Force Survey. Then,
40,141 firms (332,936 observations) have been excluded due to incomplete balance sheets,
and further 16,543 firms (45,673 observations) for lack of consistency between specific
budget items. Henceforth, the final sample is an unbalanced panel of 132,039 firms,
covering all sectors of the Italian economy for the years 19961999. From the AIDA
database I have derived information on value added, wages, capital stocks, R&D
expenditure and employment. Real values have been obtained by deflating the nominal
measures with two digit producer price indices for the different years provided by ISTAT
(the Central Statistics Institute).
The data drawn from the two datasets have then been aggregated into proportions
(for the variables training, male, age, education and occupation, taken from the LFS)
6

Groot (1998) develops a model to estimate the rate of depreciation of human capital. He estimates the model
on data for Great Britain and the Netherlands, and finds that the rate of depreciation of education is 1117% per
year. Since there is no reason to believe that economic and technological changes happen at a faster rate in Italy
than in UK or the Netherlands, I have used an average value of 15% in my estimations.
7
It is provided by Bureau van Dijk.
8
It is important to note that the absence of any dimensional limit constitutes one of the main strenghts of the
database used, given the structural composition of the Italian industry, mainly formed of small and medium
enterprises.

562

G. Conti / Labour Economics 12 (2005) 557576

Table 1
Training incidence by sector
Rank

ATECO2002

Description

Flow(%)

Stock(%)

1
2
3
4
5
6
7
8
9
10
11

11
8
2
9
12
7
3
5
6
4
1

Education, Health and related Social Services

Finance, Banking and Real Estate
Energy, Mining and Quarrying
Business Services and other Professional Activities
Community, Social and Personal Services
Transports and Communication
Manufacturing
Wholesale and Retail Trade
Hotels and Restaurants
Construction
Agriculture

10.74
8.12
5.96
5.79
4.44
3.72
2.65
2.09
1.98
1.79
1.54

43.38
37.29
35.46
32.39
27.26
23.49
22.15
17.96
19.77
17.97
11.91

and averages (for the variables value added, wages, capital stock, R&D expenditure,
hours worked and employees) at industry9 level, and then merged. The rationale behind
this choice relies on the different level of aggregation available in the two datasets: while
the AIDA database contains data disaggregated at the firm level (5digit ATECO2002),
the Labour Force Survey only provides divisional information at a higher level of
aggregation (12 sectors). Aggregating the data also at regional level has, henceforth,
two advantages: on the one side, it increases the level of disaggregation in a
geographical dimension, on the other, it allows to take into account the high
productivity differentials and the marked disparities in industry agglomeration and
labour market outcomes existing in the Italian regions. As argued in Dearden et al.
(2000) aggregation allows to capture the within-industry spillovers that would be left
out in case of a firm- or individual-level analysis,10 although the advantages arising
from this methodology have to be weighed against the possible problems due to
aggregation bias (see Grunfeld and Griliches, 1960).
Ideally, the aggregation process would have left me with data on 228 industries over 4
years, for a total of 912 data points. After cleaning the AIDA database, I was left with 228
industries, for a total of 866 observations. However, I was worried about the quality of the
data in some cells with a very low number of firms. The majority of these industries were
operating in the public sector, and a closer inspection of the data revealed that the series
were quite unreliable,11 so I decided, somewhat reluctantly, to drop the cells containing
less than 20 firms, otherwise the measurement error in the micro data would have been

9
Here industry is defined as a cluster of firms located in the same region and operating in the same sector of
activity. The sectors are coded according to the ATECO2002 classification, using a 2digit level of disaggregation
into 12 sectos. The number of regions amounts to 19, due to the lack of information on one of the smaller regions
in the North of Italy (Val dAosta) in the Labour Force Survey. Dropping it corresponded to a loss of only 318
observations in the AIDA database; moreover, further 18 observations were excluded as consisting of firms
located outside Italy.
10
The new growth theory (see Aghion and Howitt, 1998) has stressed the role played by human capital
externalities in fostering long-term economic performance.
11
Measuring productivity and wages in the public sector is a well-known difficult problem.

G. Conti / Labour Economics 12 (2005) 557576

563

Table 2
Summary statistics (pooled sample)
Variable
Proportions
Stock of training
Flow of training
Male employees
1524
2534
3544
4554
5564
Degree/postdegree
Upper-secondary
Vocational
Compulsory education
Levels
Log real value added per employee
Log real wage per employee
Log capital-labour ratio
Log R&D expenditure per employee
Average hours worked
Average firm size
Growth rates
Labour productivity
Wages
Inflow rate
Outflow rate

Mean

Std. Dev.

Min.

Max.

0.243
0.039
0.665
0.091
0.280
0.290
0.234
0.114
0.096
0.284
0.072
0.548

0.115
0.036
0.181
0.044
0.068
0.051
0.057
0.058
0.117
0.135
0.046
0.220

0.028
0
0.251
0.005
0.054
0.156
0.097
0
0
0.041
0
0.089

0.680
0.214
1
0.267
0.567
0.517
0.500
0.468
0.468
0.711
0.285
0.941

10.701
9.894
10.823
5.063
40.5
138.9

0.367
0.272
0.712
1.447
3.5
626.1

9.152
8.527
8.435
0
29.4
7.6

14.219
13.742
14.208
9.054
48.9
8137.9

0.028
0.033
0.061
0.109

0.177
0.153
0.163
0.203

 1.474
 1.495
0
0

1.218
1.249
1.351
1.638

exacerbated and worsened attenuation bias.12 The final sample consists of 176 industry
groupings observed over a maximum period of 4 years, for a total of 633 data points used
in the empirical estimates.
The basic characteristics of the matched sample are described in the following two
tables. Table 1 illustrates the incidence of training across sectors,13 ranking each of them
both by its propensity to train,14 and by the stock of accumulated post-schooling human
capital of their workforce.15 It can be readily seen that high-training industries are those
providing services of different nature; this seems pretty obvious, given that this kind of
businesses crucially rely on the role of human resources. The high ranking of Finance,
Banking and Real Estate also comes at no surprise, given the intensive use of computers

12

These accounted for 26.9% of the original sample, but only for 16.9% of the total employment.
The absence of sector 10, Public Administration, Defence and Social Insurance, is a consequence of the
sample selection procedure outlined above.
14
Here I refer to propensity to train as the proportion of workers who have attended a course in the four weeks
preceding the interview, according to the question asked in the LFS.
15
The second variable is the derived measure of training, obtained following the procedure outlined above.
13

564

G. Conti / Labour Economics 12 (2005) 557576

Table 3
Summary statistics (pooled sample)
Variable
Proportions
Stock of training
Flow of training
Male employees
Age 1524
Age 2534
Age 3544
Age 4554
Age 5564
Degree/postdegree
Upper-secondary
Vocational
Compulsory education
Levels
Log real value added per employee
Log real wage per employee
Log capital-labour ratio
Log R&D expenditure per employee
Average hours worked
Average firm size
Growth rates
Labour productivity
Wages
Inflow rate
Outflow rate

High training

Low training

0.331
0.061
0.609
0.083
0.289
0.306
0.236
0.085
0.155
0.347
0.084
0.413

0.155
0.016
0.721
0.098
0.271
0.274
0.233
0.124
0.036
0.222
0.060
0.682

10.771
9.949
10.809
4.976
38.71
226.74

10.632
9.838
10.836
5.150
42.37
49.33

0.043
0.042
0.068
0.099

0.012
0.024
0.053
0.121

and IT equipments in these sectors. By the same token, also the high training incidence
observed in the Energy, Mining and Quarrying sector is to be expected, since these
industries use specialized equipment and require stringent safety measures. Finally, the
low ranking of industries in Transport and Communication and in Manufacturing sectors
are not surprising, if we take into account the peculiar industrial structure in Italy, mainly
characterized by small and medium enterprises (SMEs), specialized in products with a low
technological content (such as clothing, furnishing and electrical appliances), and
employing low-skilled labour. The skill content of the workforce also holds as an
explanation for the low ranking of firms in the Trade, Tourism, Construction and
Agricultural Sector.16
16
Note that the ranking of the sectors does not change according to whether we consider the flow or the stock
measure of training. However, in case of the Trade sector, only 19.81% of the workforce has already attended a
training course during the lifetime, while the proportion is 21.68% for the Tourism sector. The differences
between the two measures, however, can be easily reconciled if one thinks that usually those employed in hotels
and restaurant are specifically trained for this job at the beginning of the holiday season, so it is understandable to
find a lower proportion of these workers being trained in March, which is the month the question in the LFS refers
to.

G. Conti / Labour Economics 12 (2005) 557576

565

Summary statistics for the variables used in this paper are provided in Table 2. It is
worth noting that, after having accounted for depreciation, there is quite enough
variation in the stock of training of the workforce across the industries, ranging from a
minimum of 2.8% to a maximum of 68%. On the contrary, 2917 industries report 0
training propensity: the lack of sufficient variation in this measure hinders the possibility
of using it to identify the effect of training. The table also shows that the sample consists
mainly of middle-aged male employees working on average 40.5 hours a week in a
medium-sized firm,18 among whom more than a half has attained only a compulsory level
of education.
Finally, in Table 3 I split the sample into dhigh-trainingT and dlow-trainingT
industries, according to the stock of human capital embodied in their workforce.19 High
training industries are mainly composed by larger firms, who employ more middle-aged
female workers with a higher level of education, who work fewer hours, are more
productive and get paid higher wages as expected. Moreover, they also experience a higher
rate of labour productivity and wage growth,20 and have a higher inflow and a lower
outflow rate.21 The fact that high-training industries are less capital intensive and engage
less in R&D22 can be easily explained by noting that the majority of these industries
operates in the service sector.

3. The model
Following a modelling strategy consolidated in the literature (see Dearden et al., 2000),
it is assumed that the production function for the economy is represented by a standard
Cobb-Douglas:
Q ALa K b

where Q is value added,23 L is effective labour, K is capital, and A is a Hicks-neutral

technology parameter. Following Dearden et al. (2000), under the assumption that
17

This amounts to 16.5% of the sample.

It is worth stressing that the dimensionality of the firm in the database is representative of the Italian economy,
mainly formed by SMEs.
19
Here the criterion is the median training stock, which amounts to 0.217. However, very similar numbers and
the same relative proportions are obtained if the sample is split according to the median training intensity.
20
It is also worth noting that productivity and wages are closely linked in high-training industries, whereas
workers in low-training industries experience greater increases in wages.
21
These corresponds to the mean inter-industry inflow and outflow rates, and have been calculated as the
absolute change in industry-level employment between t and t1 divided by the average employment in the two
periods. They provide a measure of workers reallocation across sectors. In order to derive them, data on
employment in 1995 have been used; given the relevant amount of missing values for those years, inflow and
outflow dummies have been included in all the estimations in order to preserve the sample size.
22
Since some industries in the sample do not invest in R&D at all, in order not to furtherly reduce the sample
size, I have used a small value (1 euro) for their R&D stock. Hence, a dummy variable is added in al the estimated
models, which equals 1 for those industries not engaging in R&D activities, and 0 otherwise.
23
Griliches and Ringstad (1971) list numerous justifications for the value-added specification of the production
function.
18

566

G. Conti / Labour Economics 12 (2005) 557576

training has a positive effect on workers productivity, effective labour can be written
as:
L N U cN T

where N U are untrained workers and N T are trained workers (and we expect g N 1).
Substitution of Eq. (3) into (2) yields:

a
4
Q A N U cN T K b
which, after some manipulations, can be rewritten as:
Q A1 c  1T RAIN a N a K b

where TRAIN = N T /N represents the proportion of trained workers in an industry. The

production function can be rewritten in logarithmic form as:24
lnQ lnA ac  1T RAIN alnN blnK

Finally, under the assumption of constant returns to scale, Eq. (6) can be respecified in
per-capita terms as:


Q
ln
N

 
K
lnA 1  bc  1T RAIN bln
N

where the dependent variable, labour productivity, is measured as the natural logarithm of
real value added per employee from

the balance sheets, TRAIN is the proportion of trained
workers in an industry, and ln NK is measured as the natural logarithm of the real value of
tangible fixed assets from the balance sheets (plant and machinery, land and buildings,
tools and equipment).
Following Dearden et al. (2000), I have firstly estimated the above production function,
in order to assess the effect of training on the average level of productivity for the
economy in the years 19961999; in a second step, I have estimated a wage equation
keeping the same explanatory variables, in order to compare the gains from training
accruing to firms and to workers. Both equations can be expressed in terms of the
following general specification:
yit a b1 T RAIN b2 Xit eit

where y it is the outcome of interest (labour productivity or wages), X it the vector of

explanatory variables, and qit = f i + u it , i.e. the error term is composed of a time-invariant
industry-specific effect, and a time-varying white noise.
Eq. (8), however, may suffer from the major weakness that some of the regressors could
be correlated with the error term due to the presence of industry-specific time-invariant
24

Here I use the approximation ln(1 + x) = x, assuming (g1)TRAIN is small.

G. Conti / Labour Economics 12 (2005) 557576

567

factors.25 To deal with this potential source of bias, a first-difference version of Eq. (8) has
been estimated:




9
yi;t  yi;t1 b1 TRAINit  TRAINi;t1 b2 Xit  Xi;t1 eit  ei;t1
This equation relates productivity growth to the change in the proportion of trained
workers. As argued in Barrett et al. (2001), the assumption underlying this model points to
the change in the stock of human capital, rather than the flow, as the main factor fostering
long-term economic performance.
In addition, in order to avoid omitted variable bias (and hence overestimate the true
returns to training), in the empirical estimation I have included several controls, taking into
account observed heterogeneity both in the workers dimension (by adding proxies for
human capital such as age and education), and in the firms dimension (by including percapita expenditure in R&D as a proxy for the rate of innovation); I have also controlled for
gender, working hours, and inflow and outflow rates. Time dummies have been included
to control for time-varying effects, such as the impact of technological progress or some
other unobserved factor linked to the business cycle. Finally, several estimation techniques
have been applied: firstly, the model has been estimated using standard linear techniques
and the within-group estimator. However, for short panels the consistency of the latter
estimator requires the regressors to be strictly exogenous, which is not a suitable
assumption in the present case, because transitory shocks on productivity could be
correlated with training26 (as well as the other inputs), resulting in an underestimation of
the true returns. Hence, I have drawn on more recent advances in the Generalized Method
of Moments techniques to deal with this limitations. The GMM handles not only
unobserved heterogeneity, but also potential endogeneity of training. In the original FirstDifference GMM estimator developed by Arellano and Bond (1991), and then extended by
Arellano and Bover (1995), the variables are first-differenced, in order to eliminate timeinvariant industry-specific effects, and the predetermined and endogenous variables in first
differences are instrumented with suitable lags of their own levels, in order to correct for
simultaneity. However, it is well known that the original Arellano-Bond estimator has poor
finite sample properties when the lagged levels of a series are weak instruments for the
first differences, especially for variables which are close to a random walk.27 Blundell and
Bond (1998 and 2000) described how to increase efficiency by taking into account
additional nonlinear moment conditions, which corresponds to adding T2 equations in
levels to the system,28 in which pre-determined and endogenous variables in levels are
instrumented with suitable lags of their own differences. The so-called extended SystemGMM estimator, as any valid instrumental variable strategy, handles not only endogeneity,
25
For example, technological change may occur at a faster rate in some industries, having an impact on both the
regressors and the dependent variable: in this case, cross-section estimates are inconsistent.
26
For example, firms may choose to train the workforce in periods in which the demand is low.
27
Griliches and Mairesse (1997) have noted that this a severe problem especially in the context of the
production functions. If the variables evolve in a random walk like fashion, the past levels have no power as
instruments for the current growth rates, unless one assumes the existence of lags in adjustments to shocks, in
which case, nonentheless, the power of the internal instruments is rather low.
28
The additional equations come from the moment restriction: E (qit Dqi,t1) = 0, where i indexes the industry,
and t = 3, 4,. . .,T is the total number of periods in which the industry is present.

568

G. Conti / Labour Economics 12 (2005) 557576

but it should also correct for bias arising from transitory measurement error both in the
dependent variable and the regressors. I have implemented the two-step version of the
extended GMM-SYS estimator using the finite-sample correction for the two-step
covariance matrix developed by Windmeijer (2000).29

4. The results
Table 4 presents the results for the productivity regressions. In Model 1, training is
measured in levels, as the proportion of workers who have accumulated post-schooling
skills during their working life, using the TRAIN variable derived following the
methodology outlined above. Firstly I have estimated the OLS as a reference. Training
has a positive and significant effect on labour productivity in the basic specification which
includes only capital, R&D and hours worked as controls; however, this impact is clearly
overstated, since the coefficient becomes negative and significant after controlling for
inflow and outflow rates, workers observed characteristics (sex and age) and skills
(education). This could be well a signal of endogeneity. In fact, fixed effect estimates
recover a positive impact of training on labour productivity, which remains significant
with a high point estimate also after conditioning upon the full set of controls. Turning to
the other variables, the coefficient on the capital-labor ratio is highly significant, and its
magnitude confirms the existence of constant returns to scale, since the share of the wage
bill in value added is about 0.46. Productivity appears to fall in hours worked, but the
effect is well determined only in the baseline model. Lastly, R&D expenditure has a strong
and significant impact on productivity only in the simplest specification. However, the
negative sign of the coefficient seems to be mainly driven by endogeneity: when
reestimating all the equations using the lagged value, the coefficient reverts to a positive
sign, and the effect of training is reinforced (the coefficient is 0.449 with a level of
significance of 1%). The estimation results for the first-difference version of this model
(the last four columns in Table 4) confirm the robustness of the main finding: the change in
the stock of accumulated human capital has a positive effect on labour productivity
growth, with a level of significance stable at 5% across all different specifications. This
confirms the fact that training has also a long-lasting effect on industry productivity.
Turning to the other variables, the capital-labour ratio maintains the high level of
significance achieved in the equations in levels, while R&D and hours worked are poorly
estimated. On the other side, both measures of turnover exhibit positive and highly
significant coefficients: this seems to suggest that a higher speed of reallocation of workers
across sectors leads to a better match, which fosters productivity.
Until now the estimation techniques adopted have taken into account industries
heterogeneity both in an observed and in an unobserved dimension. However, endogeneity
and serial correlation must be taken into account in the context of production functions:
shocks in productivity might be well correlated with training, since firms can adjust their
29
In Monte Carlo simulations it has often been found that the asymptotic standard errors of the efficient two-step
GMM estimator are severely downward biased in small samples. Windmeijer (2000) has developed a variance
correction to increase the accuracy of the inference in two-step GMM estimations, and overcome this limitation.

Table 4
Production function estimates
OLS(1)

OLS(2)

FE(1)

Train(%)
0.234 (0.130) 0.424 (0.178)
0.322
Ln(K/N)
0.333 (0.017)
0.330 (0.018)
0.431
Ln(R&D/N)
0.029 (0.009) 0.015 (0.009) 0.016
Ln(Hours/N) 0.919 (0.169) 0.365 (0.318)
0.236
Inflow(%)
0.044 (0.073) 0.045 (0.059) 0.018
Outflow(%) 0.078 (0.062) 0.066 (0.049) 0.027
Male
0.381 (0.158)
Age 2534
0.171 (0.408)
Age 3544
0.404 (0.396)
Age 4554
0.470 (0.048)
Age 5564
0.193 (0.429)
Degree/post
0.391 (0.327)
Uppersec
0.238 (0.217)
Vocational
0.168 (0.435)
R2
0.428
0.669
0.407
NT
633
633
633

FE(2)

Model 2

OLS(1)

OLS(2)

FE(1)

(0.167)
0.349 (0.172) DTrain(%)
0.314 (0.132)
0.343 (0.144)
0.383
(0.027)
0.431 (0.028) DLn(K/N)
0.314 (0.025)
0.317 (0.026)
0.399
(0.009) 0.017 (0.010) DLn(R&D/N) 0.006 (0.008) 0.005 (0.008) 0.003
(0.346)
0.315 (0.364) DLn(Hours/N) 0.124 (0.281) 0.102 (0.299) 0.451
(0.047) 0.007 (0.048) DInflow(%)
0.079 (0.034)
0.087 (0.035)
0.133
(0.039) 0.024 (0.039) DOutflow(%)
0.040 (0.031)
0.045 (0.031)
0.071
0.152 (0.251) DMale
0.441 (0.202)
0.393 (0.389) DAge 2534
0.005 (0.318)
0.404 (0.381) DAge 3544
0.343 (0.303)
0.127 (0.396) DAge 4554
0.202 (0.318)
0.395 (0.458) DAge 5564
0.176 (0.363)
0.022 (0.433) DDegree/post
0.527 (0.344)
0.294 (0.238) DUppersec
0.466 (0.195)
0.060 (0.408) DVocational
0.515 (0.329)
0.413
R2
0.283
0.292
0.411
633
NT
456
456
456

FE(2)
(0.159)
0.376 (0.159)
(0.032)
0.392 (0.032)
(0.009) 0.002 (0.009)
(0.338) 0.354 (0.343)
(0.038)
0.127 (0.038)
(0.032)
0.065 (0.035)
0.558 (0.224)
0.028 (0.363)
0.337 (0.329)
0.374 (0.351)
0.270 (0.413)
1.013 (0.393)
0.588 (0.217)
0.495 (0.372)
0.451
456

G. Conti / Labour Economics 12 (2005) 557576

Model 1

Dependent variable: log(value added per worker) in Model 1, change in log(value added per worker) in Model 2.
All models include year dummies, R&D dummies, inflow and outflow dummies. Models OLS(2) also include region and sector dummies.

569

570

G. Conti / Labour Economics 12 (2005) 557576

inputs to changes in demand, as outlined above. Henceforth, the GMM-estimator has been
implemented to overcome the limitations of the techniques previously adopted. The results
are presented in Table 5. Each regression includes all the variables used in the previous
estimations, but only the results on the variables more closely related to the production
process are reported.30 In the first column, the First-Difference GMM is firstly estimated
as a benchmark. The coefficient on training is positive, with a magnitude that resembles
the one obtained in the previous specification, but fails to achieve significance at a
conventional level. Furthermore, the coefficient on capital is unreasonably low: this is in
line with what shown by Blundell and Bond (1998): the lagged levels of a series provide
weak instruments for the first differences, and produce implausibly low estimates
because measurement error in the explanatory variables bias the coefficients towards
zero. Consequently, I have implemented the full two-step GMM system estimator, using
the finite-sample correction for the two-step covariance matrix proposed by Windmeijer
(2000). Training recovers significance at a conventional level, and the coefficient on
capital is doubled. In the next four columns, I have respectively added a lag for the
dependent variable, the training variable, and for capital, hours worked, R&D and the
turnover rates. The coefficient on training varies somehow across the different
specifications, but it is always strongly significant and with a higher point estimate
than the one estimated when treating it as exogenous. The other variables included also
exhibit highly significant values, and they have the expected sign; in particular, it should
be noted that, while the current levels of R&D fail to achieve significance, its lagged
levels are positive and significant at 10%. All the specifications easily pass all the
diagnostics tests.
In order to check the robustness of the results obtained in the dynamic specification, I
included employment (and eventually its lag) to test for non-constant returns: only in one
case the coefficient achieved a level of significance of 10%, but in that case the diagnostics
exhibited clear evidence of misspecification; furthermore, when included in the full
dynamic model (last column), employment and its lag were jointly insignificant with a pvalue of 0.24.
Now Ill turn to discuss the wage equation results. In order to ease comparability, I have
used exactly the same models as in the productivity regression. There is no significant
effect of training on wages in the static model of Table 6; in particular, when controlling
for skills using linear estimation techniques, the coefficient becomes negative and
significant, suggesting some form of endogenous effect similar to the one known as
dAshenfelters dipT. All the other variables are conventionally signed. Turning to the
results for the model in first differences, a positive and significant impact of the increase in
the stock of trained workforce on wage growth is uncovered, which seems suggestive of
the existence of a long-run effect of accumulated skills on the earnings of the individuals.
Finally, Table 7 presents the estimation results for the GMM estimation of the effect of
training on wages. When taking endogeneity into account, the estimated coefficients fail to
achieve significance at a conventional level in all the specifications adopted. Turning to
the effect of the other variables, industries with a high capital-labour ratio and engaging

30

Full results are available from the author upon request.

Table 5
Production function estimates
Model 1

GMM-FD

GMM-SYS(1)

GMM-SYS(2)

GMM-SYS(3)

GMM-SYS(4)

GMM-SYS(5)

0.527 (0.082)
0.451 (0.177)
0.431 (0.293)
0.348 (0.057)
0.134 (0.057)
0.026 (0.016)
0.037 (0.015)
0.199 (0.424)
0.710 (0.455)
0.139 (0.137)
0.018 (0.075)
0.303 (0.117)
0.059 (0.047)
0.236
0.004

0.502 (0.079)
0.408 (0.183)
0.349 (0.282)
0.336 (0.055)
0.131 (0.055)
0.021 (0.017)
0.035 (0.014)
0.293 (0.398)
0.732 (0.464)
0.132 (0.135)
0.039 (0.085)
0.299 (0.113)
0.054 (0.040)
0.166
0.005

456

456

0.313 (0.210)

0.334 (0.203)

0.516 (0.088)
0.317 (0.168)

0.153 (0.068)

0.317 (0.056)

0.246 (0.050)

0.505 (0.084)
0.383 (0.147)
0.412 (0.279)
0.254 (0.044)

0.006 (0.029)

0.006 (0.023)

0.013 (0.018)

0.013 (0.016)

0.359 (0.583)

0.942 (0.558)

0.432 (0.398)

0.526 (0.420)

0.062 (0.055)

0.006 (0.087)

0.166 (0.134)

0.166 (0.145)

0.095 (0.061)

0.060 (0.065)

0.359 (0.133)

0.344 (0.121)

0.315
0.001
0.441
456

0.306
0.001
0.955
456

0.292
0.003

0.250
0.003

456

456

G. Conti / Labour Economics 12 (2005) 557576

Ln(vadd/N)t1
Train(%)
Train(%)t1
Ln(K/N)
Ln(K/N)t1
Ln(R&D/N)
Ln(R&D/N)t1
Ln(Hours/N)
Ln(Hours/N)t1
Inflow(%)
Inflow(%)t1
Outflow(%)
Outflow(%)t1
Hansen test
AR(1) test
AR(2) test
NT

Dependent variable: log(value added per worker).

All models include year dummies, R&D dummies, inflow and outflow dummies.
All the variables are treated as endogenous (except the dummies).
Model GMM-SYS(5) includes lags for all the variables.
p-values are reported for AR(1), AR(2) and Hansen tests. A full stop in the AR(2) test box indicates that no output has been reported: the residuals and the L(2) residuals
have no obs in common, so the AR(2) is trivially zero.

571

572

Table 6
Wage equation estimates
OLS(1)

Train(%)
Ln(K/N)
Ln(R&D/N)
Ln(Hours/N)
Inflow(%)
Outflow(%)
Male
Age 2534
Age 3544
Age 4554
Age 5564
Degree/post
Uppersec
Vocational
R2
NT

0.059
0.171
0.017
0.959
0.021
0.070

0.236
633

OLS(2)
(0.112)
(0.014)
(0.008)
(0.145)
(0.062)
(0.053)

0.459
0.177
0.001
0.537
0.080
0.033
0.499
0.061
0.676
0.570
0.261
0.329
0.194
0.352
0.468
633

FE(1)

FE(2)

Model 2

(0.167)
0.203 (0.172)
0.215 (0.176) DTrain(%)
(0.017)
0.342 (0.028)
0.339 (0.029) DLn(K/N)
(0.008)
0.003 (0.010)
0.003 (0.010) DLn(R&D/N)
(0.299)
0.245 (0.355)
0.273 (0.373) DLn(Hours/N)
(0.056) 0.085 (0.048) 0.073 (0.135) DInflow(%)
(0.047) 0.017 (0.040) 0.010 (0.041) DOutflow(%)
(0.148)
0.030 (0.258) DMale
(0.383)
0.429 (0.399) DAge 2534
(0.372)
0.549 (0.391) DAge 3544
(0.383)
0.615 (0.406) DAge 4554
(0.403)
0.351 (0.469) DAge 5564
(0.307)
0.001 (0.444) DDegree/post
(0.204)
0.207 (0.245) DUppersec
(0.408)
0.179 (0.418) DVocational
0.331
0.337
R2
633
633
NT

OLS(1)
0.253
0.184
0.005
0.164
0.030
0.044

0.168
456

OLS(2)

FE(1)

FE(2)

(0.123)
0.305 (0.134)
0.319 (0.157)
0.287 (0.156)
(0.023)
0.187 (0.024)
0.234 (0.032)
0.225 (0.031)
(0.008)
0.004 (0.008)
0.003 (0.009)
0.004 (0.009)
(0.262) 0.136 (0.280) 0.435 (0.334) 0.343 (0.336)
(0.032) 0.025 (0.033)
0.004 (0.037) 0.001 (0.037)
(0.029)
0.049 (0.029)
0.066 (0.034)
0.071 (0.034)
0.341 (0.189)
0.480 (0.219)
0.018 (0.297)
0.169 (0.356)
0.386 (0.283)
0.363 (0.323)
0.497 (0.297)
0.567 (0.344)
0.126 (0.339)
0.006 (0.405)
0.522 (0.322)
0.845 (0.386)
0.514 (0.182)
0.697 (0.213)
0.709 (0.308)
0.787 (0.365)
0.175
0.246
0.306
456
456
456

Dependent variable: log(wage per worker) in Model 1, change in log(wage per worker) in Model 2.
All models include year dummies, R&D dummies, inflow and outflow dummies. Models OLS(2) also include region and sector dummies.

G. Conti / Labour Economics 12 (2005) 557576

Model 1

Table 7
Wage equation estimates
Model 1

GMM-FD

GMM-SYS(1)

GMM-SYS(2)

GMM-SYS(3)

GMM-SYS(4)

GMM-SYS(5)

0.299 (0.117)
0.181 (0.154)
0.375 (0.228)
0.194 (0.052)
0.053 (0.029)
0.019 (0.021)
0.031 (0.011)
0.588 (0.315)
0.664 (0.369)
0.032 (0.134)
0.003 (0.053)
0.248 (0.100)
0.012 (0.029)
0.484
0.006
.
456

0.314 (0.111)
0.123 (0.160)
 0.412 (0.260)
0.185 (0.060)
 0.046 (0.030)
0.017 (0.022)
0.023 (0.010)
 0.607 (0.454)
 0.685 (0.408)
 0.016 (0.123)
0.008 (0.056)
0.264 (0.112)
0.016 (0.031)
0.382
0.007
.
456

0.199 (0.197)

0.021 (0.167)

0.331 (0.118)
0.091 (0.128)

0.092 (0.061)

0.154 (0.043)

0.153 (0.045)

0.341 (0.108)
0.158 (0.124)
0.434 (0.206)
0.166 (0.041)

0.031 (0.027)

0.002 (0.019)

0.005 (0.017)

0.009 (0.015)

 0.144 (0.562)

1.022 (0.409)

0.738 (0.297)

0.825 (0.286)

 0.092 (0.053)

0.053 (0.101)

0.022 (0.134)

0.007 (0.116)

 0.062 (0.063)

0.027 (0.067)

0.248 (0.114)

0.244 (0.113)

0.373
0.002
0.814
456

0.259
0.001
0.609
456

0.463
0.004

0.638
0.004

.
456

.
456

Dependent variable: log(wage per worker).

All models include year dummies, R&D dummies, inflow and outflow dummies.
All the variables are treated as endogenous (except the dummies).
Model GMM-SYS(5) includes lags for all the variables.
p-values are reported for AR(1), AR(2) and Hansen tests. A full stop in the AR(2) test box indicates that no output has been reported: the residuals and the L(2) residuals
have no obs in common, so the AR(2) is trivially zero.

G. Conti / Labour Economics 12 (2005) 557576

Ln(W/N)t1
Train(%)
Train(%)t1
Ln(K/N)
Ln(K/N)t1
Ln(R&D/N)
Ln(R&D/N)t1
Ln(Hours/N)
Ln(Hours/N)t1
Inflow(%)
Inflow(%)t1
Outflow(%)
Outflow(%)t1
Hansen test
AR(1) test
AR(2) test
NT

573

574

G. Conti / Labour Economics 12 (2005) 557576

more in R&D pay higher wages, while longer working hours are associated with a lower
pay. Finally, a higher degree of workers reallocation across industries is associated with
higher wages, which seems to be suggestive of the fact that turnover leads to a better
matching.
To summarize the results, training seems to have a positive and strongly significant
effect on productivity. This effect disappears only when controlling for observed
heterogeneity with the standard linear techniques, but the sign and the size of the
coefficient clearly reflects endogenous effects. Most importantly, it persists when
unobserved heterogeneity is taken into account, and it is robust to the first-difference
specification and to the GMM estimation. On the other side, the effect of training on
wages is much less robust.31 It achieves significance at a conventional level only in the
first-difference specification, but it does not pass the GMM estimation. Moreover,
whatever specification is considered, the estimated impact on productivity is always
greater than the effect on wages (for example, in the full-dynamic specification, the
coefficient is 0.408 in the productivity regression and 0.123 in the wage equation): this is
consistent with a human capital model in which some of the costs of training are borne
by the employees. Using the results obtained in the full-dynamic model, this implies that
raising the stock of trained workers in an industry by one percentage point leads to a
0.4% increase in productivity and to a 0.1% increase in wages. This effect is much
smaller if compared to the results obtained in other papers in this literature.32
Nonetheless, it is quite substantial on its own. There could be several reasons behind
this: on the one hand, estimation at aggregate level captures the within-industry spillovers
arising from training externalities, which are missed in case of a firm-level analysis.33 On
the other, it fails to account for non-random selection of workers in the training pool. On
a more general ground, it could reflect the existence of other unobserved industry-specific
factors that have not been controlled for (such as the existence of other human resource
management practices, as argued in Ichniowski et al., 1997). Above all, also allowing for
these caveats, the key qualitative result still holds: firms do seem to actually reap more of
the returns.

5. Concluding remarks
This paper has examined for the first time the productivity and wage effects of training
in Italy. It is based on an original dataset, which has been created aggregating individuallevel data on training from the Labour Force Survey with firm-level data on productivity

31

This finding also emerges in a recent paper by Arulampalam et al. (2004). They show that training has no
significant effect on wages at all the quantiles of the conditional wage distribution.
32
For example, Dearden et al. (2000) found that increasing the proportion of workers being trained in an
industry by 5% leads to a 4% increase in productivity and to a 1.5% increase in wages: this amounts to,
respectively, a 2% increase in productivity and to a 0.6% increase in wages in the Italian case.
33
Under this respect, the availability of a linked employer-employee database with training information, still
lacking for Italy, will provide useful results in terms of comparability between private and social returns to postschooling human capital.

G. Conti / Labour Economics 12 (2005) 557576

575

and wages from AIDA into an industry-level panel, covering the years from 1996 to 1999.
Given the availability of longitudinal information I have been able to control for
unobserved heterogeneity and potential endogeneity of training. The richness of the
database has also allowed me to construct a stock measure of training, and to control for
several workers and firms characteristics. I have then allowed for flexibility in the
modelling specification, and estimated all the models in the dual form of a production
function and a wage equation, in order to assess how the benefits from training are shared
between the firms and the workers.
The main finding is that training has a positive and significant effect on productivity.
This finding is robust to several estimation strategies, including System-GMM. However,
the effect uncovered for wages is much less robust, and smaller in size. This proves clear
evidence of the fact that firms do actually reap more of the returns.

Acknowledgements
I am deeply indebted to my supervisor, Amanda Gosling, for her generous and
invaluable support and guidance throughout the realisation of this research. I am also
grateful to two anonymous referees and to seminar participants at the 16th annual
conference of the European Association of Labour Economists 2004, for helpful
comments and suggestions which greatly improved the paper. Many people have helped
me in accessing the data. I owe special thanks to Sergio Destefanis, Tullio Jappelli and
Mario Padula for supplying the AIDA data, and to Marco Musella and Francesco Pastore
for supplying the Labour Force Survey data. Financial support from the Economic and
Social Research Council, award no. PTA030200300812, is gratefully acknowledged.
The usual disclaimer applies.

References
Acemoglu, D., Pischke, J.-S., 1998. Why do firms train? Theory and evidence. Quarterly Journal of Economics
113 (1), 79 119 (also available as NBER Working Paper, n.5605).
Acemoglu, D., Pischke, J.-S., 1999a. Beyond Becker: Training in imperfect labour markets. Economic Journal
109 (453), F112 F142.
Acemoglu, D., Pischke, J.-S., 1999b. The structure of wages and investment in general training. Journal of
Political Economy 107 (3), 539 572 (also available as NBER Working Paper, n.6357).
Aghion, P., Howitt, P., 1998. Endogenous Growth Theory. MIT Press, Cambridge, Mass.
Arellano, M., Bond, S., 1991. Some tests of specification for panel data: Monte Carlo evidence and an application
to employment equations. Review of Economic Studies 58 (2), 277 297.
Arellano, M., Bover, O., 1995. Another look at the instrumental-variable estimation of error-components model.
Journal of Econometrics 68 (1), 29 52.
Arulampalam, W., Booth, A.L. Bryan, M.L., 2004. Training in Europe. ISER working paper 0401.
Ballot, G., Fakhfakh, F., Taymaz, E., 2001. Firms human capital, R&D and performance: a study on French and
Swedish Firms. Labour Economics 8, 443 462.
Barrett, A., OConnell, P., 2001. Does training generally work? The returns to in-company training. Industrial and
Labour Relations Review 54 (3), 647 662 (also available as IZA Discussion Paper, n.51).
Bartel, A.P., 1994. Productivity gains from the implementation of employee training programs. Industrial
Relations 33 (4), 411 425 (also available as NBER Working Paper, n.3893).

576

G. Conti / Labour Economics 12 (2005) 557576

Bishop, J.H., 1994. The impact of previous training on productivityand wages. In: Lynch, L.M. (Ed.), Training
and the Private Sector, International Comparisons, NBER Series in Comparative Labour Markets. University
of Chicago Press, Chicago, pp. 161 199.
Black, S.E., Lynch, L.M., 1995. Beyond the incidence of training: evidence from a national employers survey,
NBER Working Paper, n.5321.
Black, S.E., Lynch, L.M., 1996. Human capital investments and productivity. American Economic Review
(Papers and Proceedings) 86 (2), 263 267.
Black, S.E., Lynch, L.M., 2001. How to compete: the impact of workplace practices and information technology
on productivity. The Review of Economics and Statistics 83, 434 445.
Blundell, R., Bond, S., 1998. Initial conditions and moment restrictions in dynamic panel data models. Journal of
Econometrics 87 (1), 115 145.
Blundell, R., Bond, S., 2000. GMM estimation with persistent panel data: an application to production function.
Econometric Reviews 19 (3), 321 340.
Boon, M., van der Eijken, B., 1998. Employee training and productivity in Dutch manufacturing firms. Statistics
Netherlands 13.
Brunello, G., 2002. Is training more frequent when wage compression is higher? Evidence form 11 European
countries, CESifo Working Paper, n.637 (4).
Dearden, L., Reed, H., Van Reenen, J., 2000. Who gains when workers train? Training and corporate productivity
in a panel of british industries, IFS Working Paper, n.00/01.
Griliches, Z., Mairesse, J., 1997. Production functions: the search for identification. In: Strom, S. (Ed.), Essays in
Honour of Rayner Frisch, Econometric Society Monograph Series. Cambridge University Press.
Griliches, Z., Ringstad, V., 1971. Economies of scale and the form of the production function. North Holland,
Amsterdam.
Groot, W., 1998. Empirical estimates of the rate of depreciation of education. Applied Economics Letters 5 (8),
535 538.
Grunfeld, D., Griliches, Z., 1960. Is aggregation necessarily bad? The Review of Economics and Statistics XLII
(1), 1 13.
Ichniowski, C., Shaw, K., Prennushi, P., 1997. The effects of human resource management practices on
productivity: a study of steel finishinglines. American Economic Review 87 (3), 291 313.
Lynch, L.M., 1994. Introduction. In: Lynch, L.M. (Ed.), Training and the Private Sector, International
Comparisons, NBER Series in Comparative Labour Markets. University of Chicago Press, Chicago, pp. 1
24.
OECD, 2002. Economic Outlook, Paris.
Stevens, M., 1994a. Labour contracts and efficiency in on-the-job training. Economic Journal 10 (423), 408 419.
Stevens, M., 1994b. A theoretical model of on-the-job training with imperfect competition. Oxford Economic
Papers 46 (4), 537 562.
Stevens, M., 1994c. An investment model for the supply of training by employers. Economic Journal 104 (424),
556 570.
Stevens, M., 1996. Transferable training and poaching externality. In: Booth, A.L., Snower, D.J. (Eds.), Acquiring
Skills, Market Failures, Their Symptoms and Policy Responses. Cambridge University Press, Cambridge.
Windmeijer, F., 2000. A finite sample correction for the variance of linear two-step GMM estimators, IFS
Working Paper, n.00/01.
Zwick, T., 2002. Continuous training and firm productivity in Germany, ZEW Discussion Paper, n.0250.