On-the-job training and productivity: Firm-level evidence from a large developing country

- We investigate the effects of on-the-job training on firm productivity and wages.
- We use a large panel data set of manufacturing firms in China with national representativeness.
- We combine the propensity score matching and the difference-in-differences techniques to estimate the treatment effect of training.
- We find statistically and economically significant effect of training on productivity and wage.
- These findings are not sensitive to industrial capital intensity or firm ownership structure.

We investigate the effects of on-the-job training on firm productivity and wages using a large panel data set constituted of all large and medium size manufacturing firms in China over 2003-2007. We estimate firm productivity carefully with a recent semiparametric method and combine the propensity score matching and the difference-in-differences techniques to estimate the treatment effect of training. We find consistent evidence that i) training helps boost firm productivity and wages; ii) the higher the training expenditure per capita, the higher the increase in productivity and wages; iii) firms benefit more from training than workers. These findings are not sensitive to industrial capital intensity or firm ownership structure.