Possible Effects of Training on Productivity: Contribution of Longitudinal Data

In this paper, we examine the possible effects of formal training on the productivity of Canadian firms. Although several studies have attempted to analyse the impact of training on specific business performance indicators using representative data at the organizational level, findings are not always conclusive or conducive to establishing clear relationships between training and productivity. This article considers the shortcomings of current studies and sets out the advantages of longitudinal data in measuring possible effects beyond the year in which investments are made. Discrepant results among these existing studies can be explained by the type of data available, the type of training, and technical bias influencing this relationship. Our research is mainly based on the human capital theory. From an empirical stand point, we use data gathered from the employers' questionnaire in the Workplace and Employee Survey (WES) from 1999 to 2005. We work with a sample of 1,621 firms to estimate our models and determine the impact of training on the productivity of Canadian firms. Our results show positive and significant effects on productivity up to three years after initial investments in formal training are made, hence suggesting that investments should be modelled as a dynamic process. Furthermore, investments in training should be considered more as an asset than a financial obligation.