The effects of investment in education and training on productivity growth in the European Union

This paper investigates the impact of on-the-job training on labour productivity, focusing on both the direct effects of training capital accumulation and its complementarity with other intangible capital assets. While previous research has highlighted the positive role of workplace training in enhancing productivity, we extend this literature by exploring how investments in training interact with other intangible assets such as software and data bases, innovation property, brand, and organizational capital. Using data from the EUKLEMS & INTANProd databases covering 17 industries across 27 EU countries, the UK, and the US between 1995 and 2021, we employ a difference-in-differences estimation approach within a production function framework augmented to include intangible capital. Our findings reveal that training significantly boosts labour productivity, with the effect being stronger in industries with higher training investment intensity. We also demonstrate that the complementarity between training and other intangible capital is most pronounced in business services and is mainly explained by the interaction between training and other firmspecific intangible assets such as branding and organisational capital.