Occupational mobility and the returns to training

The literature on the returns to training has pointed out that, immediately following a training episode, wages of participants in employer-sponsored training increase substantially while wages of participants in government-sponsored training hardly change. We argue that there is a potential selection issue—most of the government-sponsored trainees are occupation switchers while most participants in employer-sponsored training are occupation stayers. An occupational switch involves a substantial destruction of human capital, and once we account for the associated decline in wages, we find a large positive impact of both employer- and government-sponsored training on workers’ human capital.