Training and productivity in micro-firms

This paper examines the effect of training on productivity of micro-firms, defined in official statistics as firms with less than 10 employees. While training may represent a crucial mode of knowledge accumulation in micro-firms, which usually lack resources or structure to devote to formal innovation activities, the specificities of micro-businesses suggest that training may even be detrimental to productivity of this category of firms. Yet, the received wisdom that training should foster their productivity, as it does in larger firms, remains un-tested, mainly due to difficulties in previous literature to analyze micro-firms separately from the wider groups of small or small-medium enterprises. Exploiting a unique administrative panel dataset that records training expenses of a large sample of micro-firms located in three Italian regions, we address whether micro-firms which train enjoy a productivity premium vis-a-vis micro-firms that do not. Our main finding, controlling for endogeneity of training via Inverse Probability Weighted Regression Adjustment methods, combined with firm fixed-effects, is a positive and sizable average treatment effect of training, stable across a series of robustness checks and heterogeneity analysis.