Only the brave? Risk and time preferences of decision makers and firms' investment in worker training

Anika Jansen, Harald Pfeifer, Julia Raecke

Research output: Working paperProfessional

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Abstract

In this paper, we study the relation between decision makers’ preferences and training investments of their firms. First, we develop a theoretical framework, which takes the possibility into account that individual preferences of decision makers may influence firm behavior with respect to training. We then develop and test the hypothesis that the willingness to take risks or the preference for future profits of decision makers is positively related and procrastination negatively related to firms’ investment in worker training. Using unique firm-level data, including both person-level preference measures and firm-level information about training costs, we find empirical support for our hypothesis. Training investment is higher in firms with risk-inclined decision makers and lower in firms with procrastinating decision makers. The preference for future profits is relevant for training participation and the number of trained workers, but not for the training investment per worker. The results imply that firms have scope to adjust their profit-maximizing strategies by taking the individual preferences of their decision makers into account.
Original languageEnglish
Place of PublicationMaastricht
PublisherResearch Centre for Education and the Labour Market
Number of pages40
DOIs
Publication statusPublished - 2017

Publication series

SeriesROA Research Memoranda
Number002

JEL classifications

  • j24 - "Human Capital; Skills; Occupational Choice; Labor Productivity"
  • j31 - "Wage Level and Structure; Wage Differentials"

Keywords

  • risk and time preferences
  • training investment
  • profit maximization

Cite this

Jansen, A., Pfeifer, H., & Raecke, J. (2017). Only the brave? Risk and time preferences of decision makers and firms' investment in worker training. Research Centre for Education and the Labour Market. ROA Research Memoranda, No. 002 https://doi.org/10.26481/umaror.2017002