Jel codes: J24, D24
The international community has long recognized the important role of the small and medium enterprise sector (SMEs) in the economies of the developing world. Policymakers around the world worry about how to foster productivity and growth among this group of firms. In a modern economy, the investment in human capital is crucial to foster technological adoption and, thus ultimately, achieve higher productivity growth. This paper explores a large firm level survey across 99 countries to document the differences in the job training provided by employers across firms of different sizes. Our findings show that a strong and positive correlation across the investment in job training and firm size is a robust empirical finding within and across countries with different institutions and income levels. Furthermore, proxies for some market imperfections and institutional failures impeding SME development do not explain most of the differences in the training intensity across small and large firms. It is thus a very robust finding that large firms conduct more on the job training. Unfortunately, with our data, we cannot fully disentangle correlation from causality. It is possible that size is not driving training and that on-the-job training is productive and itself drives firm productivity and growth. We highlight that more and better data sets are needed to rigorously tackle this identification problem and thus shed more light on this important policy question in developing countries.
