Employer-sponsered training: Volume and variation over the business cycle

Author: Erik Mellander, And
Dnr: 68/2012

Tax and accounting rules facilitate firm-sponsored training during periods of high economic activity, compared to economic downturns. For example, training expenditures cannot be written off over several years – the entire cost has to be incurred during the year of training. And, unlike investments in real capital, human capital investments cannot be used as collateral for loan financing. Since the training opportunity cost, production foregone, is higher in booms than in slumps, it is likely that improved possibilities to train during periods of low economic activtity would increase the amount of training conduted. To examine this issue, a theoretical analysis considers how credit constraints affect the volume and timing of firm training over the business cycle.