Explaining Country Variation in Employee Training: An Institutional Analysis of Education Systems and Their Influence on Training and Its Returns

This article studies the relationship between employee training and institutional factors of initial skill formation and industrial relations across 14 European countries. Rather than focusing on individual participation rates and returns, the aim is to explain the observed country variation in training incidence and its returns. It turns out that there are direct links between the system of initial skill formation and training that differ between incidence and returns. Although cross-country training incidence seems to vary according to educational attainment levels and the financial input into education, the returns to training are strongly associated with the quality and stratification of secondary schooling. This finding suggests that the aggregate level of training provided is associated with educational attainment levels in terms of skill demand as well as educational expenditure, whereas training-related productivity gains are higher in systems in which school leavers and the workforce actually do possess higher skills. Educational stratification seems to increase inequality beyond education by increasing training-related earnings differentials.