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We develop a simple search equilibrium model of workplace training and education based on two features. First, investment in education improves job-related learning skills and reduces training costs burdened by firms. Second, firms with vacant skilled job slots can choose between recruitment from the market and training. Compared to Germany and Japan, the US has both a higher inflow rate into unemployment and a higher efficiency of the matching process. While the combined effort of these differences on the share of educated labor is ambiguous, the effect on the percentage of firms undertaking workplace training is to unambiguously reduce it.

We use cohort data from 11 European countries to study whether experience profiles differ by educational attainment. Previous literature does not provide a clear answer to this question, that is important to evaluate private returns to education over the working life of individuals. We find evidence that employees with tertiary education have steeper experience profiles than employees with upper secondary or compulsory education. Hence, education provides not only an initial labor market advantage but also a permanent advantage that increases with time in the labor market. We also find that differences in earnings growth by education are lower in countries with a higher level of corporatism and higher in countries which have experienced both relatively fast labor productivity growth and a relatively low educational attainment. The educational system also seems to matter, because countries with a more stratified system of secondary education have smaller differences in earnings growth by education.

The purpose of this paper is to provide an update of the empirical evidence on the private returns to education in Italy. First, we show that, whilst returns to education in Italy (based on gross wages) are in line with the European average, educational attainment is generally much lower (particularly at secondary and tertiary levels). How can we reconcile these findings? Based on a simple human capital model - where the optimal level of schooling is given by equating the marginal return to the marginal cost of education we speculate that either marginal costs are steeper in Italy or that a larger share of the population involved in human capital investment faces high marginal costs in Italy compared to the European average. Second, we examine whether the estimated returns to education have varied significantly over time. The evidence is that returns have not changed much over the period 1977 to 1995, with the exception of 1993 and 1995, when they have increased significantly, especially among female employees. Quite interestingly, the observed increase in the returns to education has been almost completely driven by higher returns to education in the public sector. Assuming that skill biased technical change has been an important factor in shifting out the marginal returns to education, an important question for future research is why these shifts have only affected returns in the public sector of the economy. Third and last, we confirm the usual finding in the international literature that accounting for measurement error in years of schooling and/or for the endogeneity of educational choices by using instrumental variables significantly increases the returns to education with respect to estimates based on OLS methods. We also show that adding family background variables to the set of instruments significantly increases returns, which suggests that these variables affect mainly the subgroup of individuals with higher marginal returns to schooling.