Evaluating the effect of tax deductions on training

Published in: Journal of Labor Economics 22 (1). (2004). 461-488. (with Hessel Oosterbeek)

Dutch employers can claim an extra tax deduction when they trainrnemployees older than age 40. This discontinuity in a firm’s trainingrncost is exploited to identify the tax deduction’s effects on trainingrnparticipation and of training participation on wages. The results showrnthat the training rate of workers just above age 40 is 15%–20% higherrnthan that of workers just below age 40. This difference mainly resultsrnfrom the postponement of training and is not a stimulating effect ofrnthe measure. The two-stage least squares estimate of the wage effectrnof training is not statistically different from zero.

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