Training in late careers — A structural approach

Abstract

This study investigates the role of on-the-job training in the employment persistence of less-educated men in their late careers. Using survey data from the German National Education Panel Study adult cohort, I estimate a structural dynamic discrete-choice model reflecting the trade-offs in employees’ training participation decisions. The data set enables me to distinguish whether non-participation is due to a lack of training funding or individual training participation costs. Consequently, I can model the impact of hypothetical policy interventions targeting training funding or individual participation barriers. I find that non-formal on-the-job training positively impacts employees’ employment persistence by reducing the rate of job layoffs and the disutility of work. Counterfactual simulations show that individual barriers to training are quantitatively important, and their elimination would have a higher potential to increase training participation than increases in training funding. The impacts of policy-induced increases in non-formal training on overall employment persistence vary from modest to large.