We examine the relationships among on-the-job training, starting wages, wage growth, and productivity growth. Our models suggest that training lowers starting wages, hut the estimated magnitudes are small. When firms are asked directly, we find that they pay higher starting wages to workers requiring less training than is typical, hut do not pay lower starting wages to workers who require more training than is typical. In contrast to the results for wage growth, we find a large, robust impact of training on productivity growth, suggesting that firms pay most of the cost and reap most of the returns to training.

John M. Barron is a professor of economics at Purdue University. Mark C. Berger is a professor of economics at the Universify of Kentucky. Dan A. Black is a professor of economics and senior research associate at the Center for Policy Research at Syracuse University. Their research was supported in part by a Summer Research Grant from the College of Business and Economics at the University of Kentucky; the grant was made possible by a donation of funds to the College from Ashland Oil, Inc. The authors also thank the Small Business Administration (contract #SBA-6640-OA-91) and the W. E. Upjohn Institute for Employment Research for financial support, and the Survey Research Center at the University of Kentucky for conducting the survey. Melissa Huffman provided able research assistance. They further thank Amitabh Chandra, Kermit Daniel, Todd Idson, Lisa Lynch, Brooks Pierce, Jim Spletzer, Ken Troske, four anonymous referees, and seminar participants at the Bureau of Labor Statistics, Econometric Winter Meetings, the University of Kentucky, and Vanderbilt University for comments. The data used in this article can he obtained beginning September 1999, through August 2002, from Mark C. Berger, Department of Economics, University of Kentucky, Lexington, KY 40506-0034.

© 2002 by the Board of Regents of the University of Wisconsin System

US ISSN 0022-166X

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