Human Capital Investments During the Working Life – The Interplay of Worker, Manager and Firm Characteristics

• Applicant: Professor Dr. Marco Caliendo
• Subject Area: Economic Policy, Applied Economics ; Statistics and Econometrics
• Term: since 2024
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 518302089

The ongoing transformation of the labour market and the changing nature of work can result in a mismatch of skills, generating demand for new skills, while other (“old”) skills are not required anymore, leading to scarcity of labour and of skills in booming sectors. One way to adjust to this is to continuously invest in human capital over the working life cycle. This is also promoted by policymakers all over Europe. In fact, national governments are working hard to facilitate continuous, lifelong investment in worker training to ensure that workers’ skills remain up-to-date, firms continue to be competitive, and living standards are maintained. However, before designing useful programs, it is important to understand the formation of on-the-job training investment decisions during the working life. While prior research - due to data restrictions and lack of exogeneous variation - primarily focused on training from the standpoint of demand (workers), we are examining in this project both the demand side (participation) and the supply side (offers) of investments in human capital during the working life by including the perspectives of firms and managers who are the primary determiners of training investments. We investigate three components of decision-making regarding on-the-job training: i) the individual worker, ii) the human resource decision-maker (manager), and iii) the firm environment. Using newly matched administrative and survey data throughout the project gives us the unique opportunity to investigate the interplay between worker, manager, and firm characteristics in the context of the broader technological transformation of the labor market. One special focus of our analysis will investigate gender differences, both in training participation and initiation, but also with respect to the influence of the decision maker’s gender on the allocation of on-the-job training. For identification we combine fixed effects and instrumental variable strategies, leveraging exogenous variation in exposure to international trade or automation across various industries and firms. These can be seen as a proxy to identify the extent to which certain skills need updating. Additionally, we incorporate vignette experiments that generate random training scenarios for managers. The findings of this project will provide the basis for policymakers to improve the design of training policies. For example, it is conceivable that any policies targeting increased training among (under-represented) workers need to be sensitive to managers’ motivations for offering training and the firm environment. By tailoring policies to groups of workers, firms, and/or sectors that have rather been underinvesting in training the findings of this project can be leveraged to ensure a frequent skill update of the labor force.

• DFG Programme: Research Units
• Subproject of: FOR 5675: Labour market transformation: Scarcity, Mismatch, and Policy
• International Connection: Australia, France
• Cooperation Partners: Professorin Deborah Cobb-Clark, Ph.D.; Dr. Arne Uhlendorff
• Co-Investigator: Professor Dr. Harald Pfeifer