Firm-sponsored training and poaching externalities in regional labor markets

A firm's decision to invest in the general human capital of its workers can be affected by labor market conditions. Firms located close to a large number of competitors might refrain from financing general training because skilled workers may be poached after completion of training. To better incorporate economic realities, we apply a novel definition of regional labor markets based on travel time rather than travel distance or political borders. Our results show that firms provide less training in dense regional labor markets, indicating that (potential) labor poaching affects the training behavior of firms. Moreover, the threat of poaching is relevant only if general training is financed by the employer. (C) 2011 Elsevier B.V. All rights reserved.