Do Workforce Development Programs Bridge the Skills Gap?

Eleanor W. Dillon (Microsoft Research)
Lisa B. Kahn (University of Rochester)

Abstract : Most U.S. states have a workforce development program that offers firms grants to fund training of new hires and existing workers. These training programs may help close skills gaps or may primarily serve local development goals. This paper explores the determinants and consequences of such programs. We describe the characteristics of program participants and estimate the effect, if any, on the amount and skill requirements of job vacancies posted by these firms. We create a unique data link between participating firms and the near-universe of online job postings collected by Burning Glass Technologies (BGT). If these programs overcome a market failure in updating worker skills, we expect to see a marked change in vacancy postings following receipt of a grant. If there are no such changes, then these programs may serve local development goals, but are likely zero sum across states. This research will provide a better understanding of whether and under what circumstances these programs can contribute to narrowing skills gaps. This agenda can then inform policy questions surrounding falling employment and stagnant wages for low- and medium-skill workers.

Passing the Hot Potato, Above or Sideways? Work Ows in Multidivisional Firms

Miguel Espinosa (Universitat Pompeu Fabra)
Ramon Lecuona (Darmouth College)

Abstract : This paper examines the organization of work flows in multi-divisional firms, where the division of labour follows both a knowledge hierarchy with skilled workers at the top and less skilled workers at the bottom, as well as horizontal segmentation into divisions on the basis of the type of knowledge held by workers. We examine the commonly occurring case in which workers at the bottom of the hierarchy are the ones initially faced with non-routine problems that affect production. These workers are often unable to distinguish whether the problems they cannot solve require more advanced knowledge -as that possessed by their hierarchical superiors, or the type of knowledge held by workers from other divisions. Should workers pass these problems above to hierarchical superiors or sideways to peers from different divisions? What are the effects of such arrangements? We provide a theoretical framework that outlines the trade-off embedded by this decision and study its main effects on skills and performance. Using a comprehensive database of e-mail communication from a large multi-divisional company, we examine the work flows of employees and find evidence that is consistent with our model.

Workhorses or White Elephants? the Effects of Earned Autonomy on State Owned Enterprises

Namrata Kala (MIT Sloan School of Management)

Abstract : State Owned Enterprises (SOEs) comprise a significant proportion of economic activity in many countries, and typically trade-off profitability with political objectives such as employment generation. Using a newly constructed dataset, I causally estimate the impact of an earned autonomy program in India on SOE performance. Managerial autonomy allowed the board of directors of profitable SOEs to undertake strategic decisions without political interference. I find that autonomy allows managers to increase the capital stock of the firm, as well as increase their sales and profits; these impacts persist for at least twelve years after the program. I identify SOE managers’ career concerns as a mechanism for the programs' impacts: the probability a manager of a SOE joins a private firm board increases after it receives autonomy. These results indicate that large gains in SOE performance are possible without privatization, and may occur partly through SOE managers’ career concerns.