Does enterprise-level training compensate for poor country-level skills? Lessons from transition countries in central and eastern Europe

This paper explores the relationship between country-level skills and enterprise-level training, and the association of these with economic performance and enterprise behaviour. Country-level data on the quality of human capital, taken from several surveys conducted by the IEA and OECD during the last ten years, are used. Enterprise-level data from a survey conducted by the EBRD and the World Bank in a wide range of countries in Europe and Asia in 2004-05 are also used. The paper shows that qualitative measures of human capital are positively correlated with a country’s GDP growth and with enterprise sales growth. In addition, enterprises are more likely to conduct training programmes in countries where the workforce is better skilled. Greater focus on enterprise training is positively related to company sales growth, but is not related to employment growth. The provision of training in smaller, locally owned companies outside the capital is shown to be on average significantly below national training levels.