Credit constraints and investment in human capital: Training evidence from transition economies

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may Alexander PopovIn 2013 all ECB publications feature a motif taken from the €5 banknote.note: This Working Paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB. AbstractUsing a unique survey database of 8265 …rms from 25 transition economies, I …nd that lack of access to …nance in general, and to bank credit in particular, is associated with signi…cantly lower investment in on-the-job training. This e¤ect is stronger in education-intensive industries and in industries facing good global growth opportunities. To address endogeneity issues, I use the structure of local credit markets as an instrument for credit constraints at the …rm-level. In addition, in panel estimates, I control for the presence of unobserved …rm-level heterogeneity, as well as for changes in macroeconomic conditions. JEL classi…cation: G10, J21, J24, M53. Keywords: credit constraints, human capital, on-the-job training. Becker (1962) was the …rst to argue that lack of access to external …nancing may depress e¢ cient investment in training, either because credit constrained workers will not be willing to accept lower wages, or because credit constrained …rms may not be able to pay workers more than their marginal product during the training period. Non-Technical SummaryHowever, because direct measures of credit constraints are missing in conventional datasets, there is no microevidence that credit constraints a¤ect training or that the magnitude of the e¤ect is economically important. There are three main stumbling blocks in evaluating the impact of credit market imperfections on investment in human capital. The …rst one is that while the literature has studied extensively what constitutes a credit constrained …rm, credit constrained …rms are usually not observable. To deal with this issue, I identify …rms that do not have access to 1 credit markets from replies to direct questions about whether …rms were denied credit or did not apply fearing that they would be denied. Second, credit constrained …rms may also be …rms for which the return to training is lower due to their more general technology, to their inability to lock workers into long-term contracts, or to their low degree of oligopsonic power. The detailed …rm-level dataset used in this paper makes it possible to circumvent this problem by allowing me to obse...

Training in the Great Recession – Evidence from an Individual Perspective

“…From a theoretical point of view, the effect is unclear because there are arguments for both directions. The few existing empirical studies on the Great Recession indicate a counter-cyclical development of training (Bellmann et al, 2014;Felstead et al, 2012;Mason and Bishop, 2015;Popov, 2014). However, there is no empirical evidence regarding the individual training behaviour of employee groups.…”

“…Based on a unique German linked employer-employee panel data set, this paper seeks to fill this gap. Using Diff-in-Diff analyses, we avoid endogeneity problems caused by unobservable third factors that otherwise influence both the training activities of the establishment and its probability of being hit by the recession (Hochfellner et al, 2015;Popov, 2014). in unskilled or semi-skilled jobs who usually earn less than the employees in the skilled jobs might be one of the reasons for the frequently observed increase in income inequality after recessions (Forster et al, 2011;Grabka, 2015;OECD, 2015).…”

“…There is empirical evidence for training being counter-cyclical (Sepulveda, 2004) or pro-cyclical Bassanini and Brunello, 2008;Majumdar, 2007). However, all studies that have analysed the effects of the Great Recession find negative effects on establishments' training activities (Bellmann et al, 2014;Felstead et al, 2012;Mason and Bishop, 2015;Popov, 2014). The recession in addition came as a shock and incurred strong uncertainty on the future development (Bloom, 2014 In the context of training decisions, for establishments, cost-benefit considerations are decisive.…”

Subsidies, financial constraints and firm innovative activities in emerging economies

“…9 Starting with 2008, the survey underwent changes in the questionnaire and methodology which aimed to improve cross-country comparability and to make it compatible with the Enterprise Surveys the World Bank has been implementing in other regions of the world since 2006. Earlier rounds of BEEPS have been used by Brown et al (2011), Gorodnichenko and Schnitzer (2013), Popov (2013), Hanedar et al (2014), while Ayyagari et al (2011) Gorodnichenko and Schnitzer (2013) analyse similarly defined variables using earlier rounds of BEEPS. In their UK SMEs analysis, Lee et al (2015) also define innovators as those firms which have introduced a new product in the previous 12 months.…”

From Institutions to Financial Development and Growth: What are the Links?

“…In an e¤ort to identify speci…c …nance-growth channels in transition economies, Popov (2014) uses survey data from …rms in 25 of these countries to study the e¤ects of credit constraints on human capital. In particular, the author shows that, after controlling for unobserved heterogeneity and macroeconomic conditions, credit-constrained …rms are about 40% less likely to o¤er on-the-job training than …rms with access to credit markets.…”