Market imperfections and firm-sponsored training

Using worker and firm data from Dutch manufacturing, our paper investigates how product market competition and labor market imperfections affect firm-sponsored training. We find that product market competition does not affect the firms' training expenditures. Increasing competition, for instance due to increased international integration and globalization, is not a threat to investments in on-the-job training. Instead, labor market imperfections influence firm-sponsored training. An increase in labor market flexibility significantly reduces the incentives of firms to invest in training. The magnitude of this effect is nevertheless small. (C) 2011 Elsevier B.V. All rights reserved.