Research Paper Discussion Paper 984
Are There Asymmetries in the Effects of Training on the Conditional Male Wage Distribution?
01 Jan 2004
We use a quantile regression framework to investigate the degree to which work-related training affects the location, scale and shape of the conditional wage distribution. Human capital theory suggests that the percentage returns to training investments will be the same across the conditional wage distribution. Other theories - whether based on imperfections in the labour market, or on skill-mix heterogeneity - suggest that this need not be the case. Using the first six waves of the European Community Household Panel, we investigate these issues for private sector men in ten European Union countries. Our results suggest that, for the vast majority of countries, investment in training yields similar percentage returns across the conditional wage distribution. In other words, the way in which unobservables interact with training is fairly uniform across the conditional distribution. Only Belgium was an outlier in this respect. However, our results do suggest that there are considerable differences in mean returns to training across countries. We also find that there are positive returns to education and that education shifts the wage distribution to the right. In addition, the returns at the upper parts of the conditional distribution are much higher than at the lower parts of the distribution. This finding is consistent with the idea that there are complementarities between unobservable ability (or productivity) and education, since higher ability individuals - further to the right in the conditional wage distribution - have higher returns to education.