The human capital of firms and the formal training of workers

Asif M. Islam; Roberta Gatti

doi:10.2478/izajodm-2023-0004

Figures & Tables

Firm offers formal training (% of firms)Note: Medium and large firms only. Survey weights used to calculate averages.

Percentage of workers received formal training (0 if no training)Note: Medium and large manufacturing firms only. Survey weights used to calculate averages.

Percentage of permanent full-time employees with a university degreeNote: Medium and large firms only. Survey weights used to calculate averages.

Overall Management ScoreNote: Medium and large firms only. Survey weights used to calculate averages.

MENA over timeNote: Medium and large firms only. Survey weights used to calculate averages.

ECA over timeNote: Medium and large firms only. Survey weights used to calculate averages.

Robustness – Production Complexity and Competition

Outcome Variable	Firm offers formal training Y/N			Share of workers offered formal training (0 if no training)

Sample	All Firms	MENA 2013–2019	ECA 2013–2019	Manf. Firms	MENA Manf. Firms (2013–2019)	ECA Manf. Firms (2013–2019)

	(1)	(2)	(3)	(4)	(5)	(6)
Overall management score	0.274^*** (0.054)	0.047 (0.108)	0.326^*** (0.061)	0.170^*** (0.049)	0.024 (0.097)	0.216^*** (0.058)
Share of permanent full-time employees with a university degree (0 to 1)	0.237^*** (0.058)	0.506^*** (0.094)	0.178^*** (0.065)	0.157^*** (0.046)	0.294^*** (0.075)	0.111^** (0.054)
Firm Spent on R&D Y/N over last 3 years	0.099^*** (0.033)	0.096 (0.080)	0.096^*** (0.035)	0.060^** (0.029)	0.053 (0.056)	0.058^* (0.033)
Introduced New Product/Service Y/N	0.044^* (0.026)	0.075 (0.049)	0.044 (0.029)	0.024 (0.019)	0.025 (0.026)	0.028 (0.022)
Introduced New Process Y/N	0.135^*** (0.028)	0.219^*** (0.066)	0.128^*** (0.028)	0.034 (0.022)	0.050 (0.036)	0.031 (0.025)
No competitor (Y/N) (domestic)	−0.054 (0.076)	−0.222^** (0.096)	−0.035 (0.088)	0.047 (0.050)	0.014 (0.051)	0.049 (0.056)
1–2 competitors (Y/N) (domestic)	−0.026 (0.028)	−0.014 (0.063)	−0.030 (0.032)	−0.027 (0.022)	−0.024 (0.035)	−0.023 (0.026)
4–10 competitors (Y/N) (domestic)	0.044^* (0.024)	0.088^* (0.051)	0.039 (0.027)	0.000 (0.021)	−0.010 (0.031)	0.003 (0.026)
Number of observations	6,494	2,051	4,443	4,336	1,544	2,792
Control Variables	YES	YES	YES	YES	YES	YES
Country Fixed Effects	YES	YES	YES	YES	YES	YES
Sector (ISIC 2 DIGIT) Fixed Effects	YES	YES	YES	YES	YES	YES
Year Fixed effects	YES	YES	YES	YES	YES	YES
Adjusted R²	0.277	0.352	0.271	0.243	0.303	0.233

Summary Statistics - MENA 2013–2019 (pooled cross-section)

Variable	Obs.	Mean	Std. Dev.	Min.	Max.
Firm offers formal training Y/N	2,554	0.243	0.429	0	1
Share of workers offered formal training (0 if no training)	1,988	0.090	0.235	0	1
Overall management score	2,554	0.486	0.199	0	1
MG1 Action when problem in the production/service provision arose	2,554	0.602	0.334	0	1
MG2 Number of production or service provision performance indicators monitored	2,554	0.360	0.336	0	1
MG3 Level of ease or difficulty to achieve targets	2,554	0.551	0.369	0	1
MG4 Personnel's knowledge of production or service provision targets	2,554	0.260	0.334	0	1
MG5 What managers’ performance bonuses were usually based on	2,554	0.560	0.428	0	1
MG6 Focus of production targets	2,554	0.569	0.378	0	1
MG7 Basis for promoting non-mangers	2,554	0.693	0.399	0	1
MG8 When underperforming managers were dismissed or reassigned	2,554	0.293	0.395	0	1
Share of permanent full-time employees with a university degree (0 to 1)	2,554	0.255	0.220	0	1
Train: Numeracy or math skills	1,489	0.0004	0.021	0	1
Train: Problem solving or critical thinking skills	1,489	0.0003	0.016	0	1
Train: Foreign language skills	1,489	0.001	0.028	0	1
Train: Managerial and leadership skills	1,489	0.009	0.097	0	1
Train: Interpersonal and communication skills	1,489	0.016	0.127	0	1
Train: Job-specific technical skills	1,489	0.251	0.434	0	1
Top manager experience in sector (years)	2,554	24.341	11.647	1	60
Log of age of firm	2,554	2.990	0.733	0	5.050
Proportion of permanent full-time workers that are female	2,472	0.253	0.274	0	1
Proportion of temporary workers (out of all workers)	2,554	0.038	0.097	0	0.826
Log of size	2,554	3.845	0.824	1.897	7.601
Senior management time spent in dealing with requirements of government regulations (%)	2,554	10.023	23.423	0	100
Average number of visits or required meetings with tax officials	2,554	0.943	1.326	0	13
Firm purchased fixed assets Y/N	2,554	0.317	0.465	0	1
Direct exports 10% or more of sales Y/N	2,554	0.334	0.472	0	1
Foreign ownership Y/N	2,554	0.067	0.249	0	1
Female top manager Y/N	2,554	0.058	0.234	0	1
Establishment has checking or savings account Y/N	2,554	0.926	0.262	0	1
ISO Certification Ownership Y/N	2,554	0.262	0.440	0	1
Website Y/N	2,554	0.662	0.473	0	1
Firm identifying inadequately educated workforce as a major or severe constraint	2,554	0.220	0.414	0	1
Firm identifying labor regulations as a major or severe constraint Y/N	2,554	0.105	0.306	0	1
Share of High-Skilled Production Workers (manf only)	1,953	0.369	0.269	0	1
Inadequately Educated Workforce (cell average)	2,539	0.205	0.196	0	1
Labor Regulations obstacle (cell average)	2,539	0.093	0.124	0	1
Competes against unregistered firms Y/N	2,554	0.454	0.498	0	1
Firm Spent on R&D Y/N over last 3 years	2,548	0.112	0.316	0	1
Introduced New Product/Service Y/N	2,549	0.223	0.416	0	1
Introduced New Process Y/N	2,540	0.171	0.377	0	1
No competitor (Y/N) (domestic)	2,068	0.022	0.146	0	1
1–2 competitors (Y/N) (domestic)	2,068	0.107	0.309	0	1
4–10 competitors (Y/N) (domestic)	2,068	0.233	0.423	0	1
Bribery Incidence (Y/N)	1,763	0.135	0.342	0	1
Financial Records (Y/N)	2,552	0.299	0.458	0	1
Manufacturing Sector Y/N	2,554	0.681	0.466	0	1

Summary Statistics - ECA 2013–2019 (pooled cross-section)

Variable	Obs.	Mean	Std. Dev.	Min.	Max.
Firm offers formal training Y/N	5,916	0.427	0.495	0	1
Share of workers offered formal training (0 if no training)	4,000	0.190	0.328	0	1
Overall management score	5,916	0.529	0.196	0	1
MG1 Action when problem in the production/service provision arose	5,916	0.697	0.277	0	1
MG2 Number of production or service provision performance indicators monitored	5,916	0.444	0.331	0	1
MG3 Level of ease or difficulty to achieve targets	5,916	0.587	0.349	0	1
MG4 Personnel's knowledge of production or service provision targets	5,916	0.383	0.389	0	1
MG5 What managers’ performance bonuses were usually based on	5,916	0.388	0.392	0	1
MG6 Focus of production targets	5,916	0.610	0.378	0	1
MG7 Basis for promoting non-mangers	5,916	0.706	0.417	0	1
MG8 When underperforming managers were dismissed or reassigned	5,916	0.414	0.462	0	1
Share of permanent full-time employees with a university degree (0 to 1)	5,916	0.251	0.239	0	1
Train: Numeracy or math skills	4,658	0.009	0.093	0	1
Train: Problem solving or critical thinking skills	4,658	0.019	0.136	0	1
Train: Foreign language skills	4,658	0.015	0.122	0	1
Train: Managerial and leadership skills	4,658	0.041	0.198	0	1
Train: Interpersonal and communication skills	4,658	0.041	0.199	0	1
Train: Job-specific technical skills	4,658	0.286	0.452	0	1
Top manager experience in sector (years)	5,916	19.989	10.657	1	60
Log of age of firm	5,916	2.771	0.646	0	5.030
Proportion of permanent full-time workers that are female	5,718	0.370	0.288	0	1
Proportion of temporary workers (out of all workers)	5,916	0.030	0.091	0	0.929
Log of size	5,916	3.909	0.870	1.099	8.006
Senior management time spent in dealing with requirements of government regulations (%)	5,916	10.714	14.931	0	100
Average number of visits or required meetings with tax officials	5,916	1.285	2.359	0	30
Firm purchased fixed assets Y/N	5,916	0.565	0.496	0	1
Direct exports 10% or more of sales Y/N	5,916	0.313	0.464	0	1
Foreign ownership Y/N	5,916	0.137	0.344	0	1
Female top manager Y/N	5,916	0.157	0.363	0	1
Establishment has checking or savings account Y/N	5,916	0.970	0.170	0	1
ISO Certification Ownership Y/N	5,916	0.377	0.485	0	1
Website Y/N	5,916	0.744	0.437	0	1
Firm identifying inadequately educated workforce as a major or severe constraint	5,916	0.264	0.441	0	1
Firm identifying labor regulations as a major or severe constraint Y/N	5,916	0.079	0.269	0	1
Share of High-Skilled Production Workers (manf only)	3,954	0.401	0.300	0	1
Inadequately Educated Workforce (cell average)	5,889	0.238	0.189	0	1
Labor Regulations obstacle (cell average)	5,889	0.081	0.120	0	1
Competes against unregistered firms Y/N	5,916	0.328	0.470	0	1
Firm Spent on R&D Y/N over last 3 years	5,910	0.168	0.374	0	1
Introduced New Product/Service Y/N	5,895	0.379	0.485	0	1
Introduced New Process Y/N	5,871	0.279	0.449	0	1
No competitor (Y/N) (domestic)	4,488	0.040	0.197	0	1
1–2 competitors (Y/N) (domestic)	4,488	0.166	0.372	0	1
4–10 competitors (Y/N) (domestic)	4,488	0.351	0.477	0	1
Manufacturing Sector Y/N	5,916	0.540	0.498	0	1

Characteristics of Training Firms

	MENA2013		MENA2019		ECA2013		ECA2019

	Training Firms	Non-Trainers	Training Firms	Non-Trainers	Training Firms	Non-Trainers	Training Firms	Non-Trainers
Small Firms (%)	37	68	44	71	54	69	57	73
Medium Firms (%)	40	27	42	24	33	27	31	23
Large Firms (%)	23	5	14	5	13	5	12	4
Young Firms (5 years or less)	9	18	7	7	12	14	11	13
Manufacturing firms (%)	37	43	29	37	25	32	27	28
Exporter (%)	29	21	23	17	17	14	19	15
Foreign Owned (%)	11	6	12	6	12	6	10	6
Female Top Manager (%)	5	5	6	5	19	19	19	20
Female Owner (%)	36	26	24	15	35	32	32	31

Summary Statistics - ECA Panel Sample

Variable	Obs.	Mean	Std. Dev.	Min.	Max.
Firm offers formal training Y/N	1254	0.423	0.494	0	1
Share of workers offered formal training (0 if no training)	827	0.230	0.354	0	1
Overall management score	1254	0.516	0.191	0	0.958
MG1 Action when problem in the production/service provision arose	1254	0.684	0.262	0	1
MG2 Number of production or service provision performance indicators monitored	1254	0.423	0.325	0	1
MG3 Level of ease or difficulty to achieve targets	1254	0.572	0.353	0	1
MG4 Personnel's knowledge of production or service provision targets	1254	0.352	0.370	0	1
MG5 What managers’ performance bonuses were usually based on	1254	0.411	0.394	0	1
MG6 Focus of production targets	1254	0.578	0.365	0	1
MG7 Basis for promoting non-mangers	1254	0.697	0.416	0	1
MG8 When underperforming managers were dismissed or reassigned	1254	0.408	0.460	0	1
Share of permanent full-time employees with a university degree (0 to 1)	1254	0.244	0.227	0	1
Top manager experience in sector (years)	1254	21.179	11.000	1	60
Log of age of firm	1254	2.889	0.625	0.000	5.030
Proportion of permanent full-time workers that are female	1209	0.384	0.296	0	1
Proportion of temporary workers (out of all workers)	1254	0.023	0.079	0	0.882
Log of size	1254	4.197	0.993	1.099	8.006
Senior management time spent in dealing with requirements of government regulations (%)	1254	12.089	16.738	0	100
Average number of visits or required meetings with tax officials	1254	1.275	2.493	0	30
Firm purchased fixed assets Y/N	1254	0.511	0.500	0	1
Direct exports 10% or more of sales Y/N	1254	0.292	0.455	0	1
Foreign ownership Y/N	1254	0.093	0.291	0	1
Female top manager Y/N	1254	0.143	0.350	0	1
Establishment has checking or savings account Y/N	1254	0.960	0.196	0	1
ISO Certification Ownership Y/N	1254	0.410	0.492	0	1
Website Y/N	1254	0.774	0.418	0	1
Firm identifying inadequately educated workforce as a major or severe constraint	1254	0.253	0.435	0	1
Firm identifying labor regulations as a major or severe constraint Y/N	1254	0.084	0.277	0	1
Share of High-Skilled Production Workers (manf only)	817	0.433	0.287	0	1
Inadequately Educated Workforce (cell average)	1247	0.230	0.192	0	1
Labor Regulations obstacle (cell average)	1248	0.086	0.141	0	1
Competes against unregistered firms Y/N	1254	0.359	0.480	0	1
Manufacturing Sector Y/N	1254	0.683	0.466	0	1

Determinants of Formal Training - MENA Panel Estimations

Model	Firm and Year Fixed Effects

Outcome Variable	Firm offers formal training Y/N	Share of workers received formal training (0 if no training)	Firm offers formal training Y/N	Share of workers received formal training (0 if no training)

Sample	MENA 2013–2019	MENA 2013–2019 Manf. Firms	MENA 2013–2019	MENA 2013–2019 Manf. Firms

	(1)	(2)	(3)	(4)
Share of permanent full-time employees with a university degree (0 to 1)	0.373^*** (0.074)	0.258^*** (0.072)	0.419^*** (0.121)	0.234^*** (0.089)
Overall management score	0.059 (0.291)	0.109 (0.114)
MG1 Action when problem in the production/service provision arose			0.222^** (0.102)	0.017 (0.057)
MG2 Number of production or service provision performance indicators monitored			0.189 (0.124)	0.033 (0.046)
MG3 Level of ease or difficulty to achieve targets			−0.125 (0.096)	−0.075 (0.092)
MG4 Personnel's knowledge of production or service provision targets			0.026 (0.150)	0.150^* (0.087)
MG5 What managers’ performance bonuses were usually based on			−0.086 (0.085)	−0.078 (0.071)
MG6 Focus of production targets			−0.073 (0.226)	0.062 (0.101)
MG7 Basis for promoting non-mangers			0.147 (0.177)	0.144 (0.106)
MG8 When underperforming managers were dismissed or reassigned			−0.166^** (0.083)	−0.091^* (0.048)
Control Variables	YES	YES	YES	YES
Firm Fixed Effects	YES	YES	YES	YES
Year Fixed Effects	YES	YES	YES	YES
Number of observations	554	395	554	395
Adjusted R²	0.249	0.212	0.311	0.289

Summary Statistics - Full Sample

Variable	Obs.	Mean	Std. Dev.	Min.	Max.
Firm offers formal training Y/N	8,470	0.393	0.488	0	1
Share of workers offered formal training (0 if no training)	5,988	0.167	0.312	0	1
Overall management score	8,470	0.521	0.197	0	1
MG1 Action when problem in the production/service provision arose	8,470	0.679	0.291	0	1
MG2 Number of production or service provision performance indicators monitored	8,470	0.429	0.334	0	1
MG3 Level of ease or difficulty to achieve targets	8,470	0.581	0.353	0	1
MG4 Personnel's knowledge of production or service provision targets	8,470	0.360	0.382	0	1
MG5 What managers’ performance bonuses were usually based on	8,470	0.420	0.404	0	1
MG6 Focus of production targets	8,470	0.603	0.378	0	1
MG7 Basis for promoting non-mangers	8,470	0.704	0.414	0	1
MG8 When underperforming managers were dismissed or reassigned	8,470	0.391	0.453	0	1
Share of permanent full-time employees with a university degree (0 to 1)	8,470	0.252	0.236	0	1
Train: Numeracy or math skills	6,147	0.007	0.085	0	1
Train: Problem solving or critical thinking skills	6,147	0.016	0.125	0	1
Train: Foreign language skills	6,147	0.013	0.112	0	1
Train: Managerial and leadership skills	6,147	0.036	0.186	0	1
Train: Interpersonal and communication skills	6,147	0.037	0.190	0	1
Train: Job-specific technical skills	6,147	0.280	0.449	0	1
Top manager experience in sector (years)	8,470	20.795	10.977	1	60
Log of age of firm	8,470	2.811	0.668	0	5.050
Proportion of permanent full-time workers that are female	8,190	0.349	0.289	0	1
Proportion of temporary workers (out of all workers)	8,470	0.031	0.092	0	0.929
Log of size	8,470	3.897	0.862	1.099	8.006
Senior management time spent in dealing with requirements of government regulations (%)	8,470	10.586	16.830	0	100
Average number of visits or required meetings with tax officials	8,470	1.222	2.209	0	30
Firm purchased fixed assets Y/N	8,470	0.519	0.500	0	1
Direct exports 10% or more of sales Y/N	8,470	0.316	0.465	0	1
Foreign ownership Y/N	8,470	0.124	0.329	0	1
Female top manager Y/N	8,470	0.138	0.345	0	1
Establishment has checking or savings account Y/N	8,470	0.962	0.191	0	1
ISO Certification Ownership Y/N	8,470	0.356	0.479	0	1
Website Y/N	8,470	0.729	0.445	0	1
Firm identifying inadequately educated workforce as a major or severe constraint	8,470	0.256	0.436	0	1
Firm identifying labor regulations as a major or severe constraint Y/N	8,470	0.083	0.277	0	1
Share of High-Skilled Production Workers (manf only)	5,907	0.393	0.294	0	1
Inadequately Educated Workforce (cell average)	8,428	0.232	0.191	0	1
Labor Regulations obstacle (cell average)	8,428	0.083	0.121	0	1
Competes against unregistered firms Y/N	8,470	0.351	0.477	0	1
Firm Spent on R&D Y/N over last 3 years	8,458	0.158	0.364	0	1
Introduced New Product/Service Y/N	8,444	0.350	0.477	0	1
Introduced New Process Y/N	8,411	0.259	0.438	0	1
No competitor (Y/N) (domestic)	6,556	0.037	0.188	0	1
1–2 competitors (Y/N) (domestic)	6,556	0.154	0.361	0	1
4–10 competitors (Y/N) (domestic)	6,556	0.328	0.470	0	1
Manufacturing Sector Y/N	8,470	0.566	0.496	0	1

Summary Statistics - MENA Panel Sample

Variable	Obs.	Mean	Std. Dev.	Min.	Max.
Firm offers formal training Y/N	554	0.253	0.435	0	1
Share of workers offered formal training (0 if no training)	395	0.090	0.218	0	1
Overall management score	554	0.494	0.199	0	1
MG1 Action when problem in the production/service provision arose	554	0.639	0.304	0	1
MG2 Number of production or service provision performance indicators monitored	554	0.345	0.337	0	1
MG3 Level of ease or difficulty to achieve targets	554	0.560	0.383	0	1
MG4 Personnel's knowledge of production or service provision targets	554	0.268	0.339	0	1
MG5 What managers’ performance bonuses were usually based on	554	0.554	0.430	0	1
MG6 Focus of production targets	554	0.559	0.390	0	1
MG7 Basis for promoting non-mangers	554	0.741	0.383	0	1
MG8 When underperforming managers were dismissed or reassigned	554	0.289	0.415	0	1
Share of permanent full-time employees with a university degree (0 to 1)	554	0.280	0.238	0	1
Top manager experience in sector (years)	554	24.134	11.579	1	60
Log of age of firm	554	3.086	0.686	0.693	5.050
Proportion of permanent full-time workers that are female	529	0.240	0.285	0	1
Proportion of temporary workers (out of all workers)	554	0.037	0.088	0	0.669
Log of size	554	4.278	1.044	2.303	7.601
Senior management time spent in dealing with requirements of government regulations (%)	554	7.964	21.105	0	100
Average number of visits or required meetings with tax officials	554	1.204	1.722	0	13
Firm purchased fixed assets Y/N	554	0.312	0.464	0	1
Direct exports 10% or more of sales Y/N	554	0.336	0.473	0	1
Foreign ownership Y/N	554	0.083	0.276	0	1
Female top manager Y/N	554	0.038	0.191	0	1
Establishment has checking or savings account Y/N	554	0.904	0.294	0	1
ISO Certification Ownership Y/N	554	0.336	0.473	0	1
Website Y/N	554	0.657	0.475	0	1
Firm identifying inadequately educated workforce as a major or severe constraint	554	0.181	0.385	0	1
Firm identifying labor regulations as a major or severe constraint Y/N	554	0.079	0.271	0	1
Share of High-Skilled Production Workers (manf only)	392	0.371	0.273	0	1
Inadequately Educated Workforce (cell average)	544	0.182	0.179	0	1
Labor Regulations obstacle (cell average)	544	0.094	0.121	0	1
Competes against unregistered firms Y/N	554	0.478	0.500	0	1
Manufacturing Sector Y/N	554	0.729	0.445	0	1

Management Practices and Formal Training in MENA by Level of Corruption and Financial Record Keeping

Model	OLS

Outcome Variable	Firm offers formal training Y/N

Sample	MENA 2013–2019

	Bribery Incidence		Financial Records

	Yes	No	Yes	No

	(1)	(2)	(3)	(4)
Overall management score	−0.147 (0.306)	0.216^** (0.102)	0.339^** (0.134)	−0.002 (0.136)
Share of permanent full-time employees with a university degree (0 to 1)	0.081 (0.310)	0.478^*** (0.131)	0.543^*** (0.129)	0.472^*** (0.122)
Number of observations	198	1,565	832	1,720
Controls	YES	YES	YES	YES
Country Fixed Effects	YES	YES	YES	YES
Year Fixed effects	YES	YES	YES	YES
Adjusted R²	0.570	0.277	0.316	0.249

Determinants of Formal Training - ECA Panel Estimations

Model	Firm and Year Fixed Effects

Outcome Variable	Firm offers formal training Y/N	Share of workers received formal training (0 if no training)	Firm offers formal training Y/N	Share of workers received formal training (0 if no training)

Sample	ECA 2013–2019	ECA 2013–2019 Manf. Firms	ECA 2013–2019	ECA 2013–2019Manf. Firms

	(1)	(2)	(3)	(4)
Share of permanent full-time employees with a university degree (0 to 1)	0.084 (0.469)	−0.499^** (0.210)	0.039 (0.450)	−0.448^** (0.199)
Overall management score	0.325^* (0.193)	0.595^*** (0.123)
MG1 Action when problem in the production/service provision arose			0.274^** (0.115)	0.120 (0.130)
MG2 Number of production or service provision performance indicators monitored			0.203 (0.155)	0.062 (0.117)
MG3 Level of ease or difficulty to achieve targets			0.091 (0.086)	0.120 (0.115)
MG4 Personnel's knowledge of production or service provision targets			0.219^* (0.112)	0.170^** (0.075)
MG5 What managers’ performance bonuses were usually based on			0.035 (0.106)	−0.030 (0.088)
MG6 Focus of production targets			0.027 (0.107)	0.190^* (0.103)
MG7 Basis for promoting non-mangers			−0.180^* (0.103)	−0.121^* (0.071)
MG8 When underperforming managers were dismissed or reassigned			−0.040 (0.071)	0.108^* (0.065)
Control Variables	YES	YES	YES	YES
Firm Fixed Effects	YES	YES	YES	YES
Year Fixed Effects	YES	YES	YES	YES
Number of observations	1,254	827	1,254	827
Adjusted R²	0.197	0.240	0.277	0.345

Management Practices Scoring

MG1 Problem resolution (r1)	Score
Action when problem in the production/service provision arose
Most structured: We fixed it and took action to make sure that it did not happen again, and had a continuous improvement process to anticipate problems like these in advance	1
Second most structured: We fixed it and took action to make sure it did not happen again	0.667
Second least structured: We fixed it but did not take further action	0.333
Least structured: No action was taken	0

MG2 Number of performance indicators monitored (r3)	Score

Number of production or service provision performance indicators monitored
10 or more indicators	1
3–9 indicators	0.667
1–2 indicators	0.333
No indicators	0

MG6 Length of focus of production targets	Score

Focus of production targets
Combination of short-term and long-term targets	1
long-term only	0.667
short-term only	0.333
No targets or targets not achieved	0

MG3 Level of ease or difficulty to achieve production or service provision targets (r6)	Score

Level of ease or difficulty to achieve targets
No targets or targets not achieved	0
Achieved without much effort	0.2
Only achieved with extraordinary effort	0.4
Achieved with some effort	0.6
Achieved with normal amount of effort	0.8
Achieved with more than normal effort	1

MG4 Knowledge of production or service provision targets (r7)	Score

Personnel's knowledge of production or service provision targets
All managers and most workers	1
Most managers and most workers	0.667
Most managers and some workers	0.333
Only senior managers	0
No targets	0

MG5 Basis of bonuses (r9)	Score

What managers’ performance bonuses were usually based on
Their own performance as measured by targets	1
Their team or shift performance as measured by targets	0.75
Their establishment's performance as measured by targets	0.5
Their company's performance as measured by targets	0.25
No performance bonuses	0

MG7 Promotion of non-mangers	Score

Basis for promoting non-mangers
Based solely on performance and ability	1
Based partly on performance and ability, and partly on other factors (for example, tenure or family connections)	0.667
Based mainly on factors other than performance and ability (for example, tenure or family connections)	0.333
Non-managers are normally not promoted	0

MG8 Dismissal	Score

When underperforming managers were dismissed or reassigned
Within 6 months of underperformance	1
After 6 months	0.5
Rarely or never	0

Determinants of Formal Training - Type of Management Score

Model	OLS

Outcome Variable	Firm offers formal training Y/N			Share of workers received formal training (0 if no training)

Sample	All Firms	MENA 2013–2019	ECA 2013–2019	Manf. Firms	MENA Manf. Firms (2013–2019)	ECA Manf. Firms (2013–2019)

	(1)	(2)	(3)	(4)	(5)	(6)
Share of permanent full-time employees with a university degree (0 to 1)	0.253^*** (0.051)	0.479^*** (0.094)	0.190^*** (0.057)	0.158^*** (0.044)	0.317^*** (0.080)	0.098^* (0.052)
MG1 Action when problem in the production/service provision arose	0.030 (0.035)	−0.012 (0.066)	0.059 (0.041)	0.028 (0.033)	0.006 (0.049)	0.039 (0.042)
MG2 Number of production or service provision performance indicators monitored	0.117^*** (0.034)	0.137^** (0.063)	0.118^*** (0.038)	0.084^*** (0.026)	0.053 (0.043)	0.099^*** (0.030)
MG3 Level of ease or difficulty to achieve targets	0.001 (0.034)	−0.072 (0.058)	0.017 (0.040)	0.007 (0.025)	−0.033 (0.044)	0.017 (0.029)
MG4 Personnel's knowledge of production or service provision targets	0.124^*** (0.028)	0.018 (0.058)	0.127^*** (0.031)	0.092^*** (0.022)	0.007 (0.046)	0.104^*** (0.025)
MG5 What managers’ performance bonuses were usually based on	0.054^** (0.027)	0.003 (0.044)	0.073^** (0.031)	0.009 (0.021)	−0.027 (0.029)	0.025 (0.025)
MG6 Focus of production targets	−0.020 (0.032)	−0.000 (0.073)	−0.016 (0.035)	−0.032 (0.028)	−0.030 (0.040)	−0.026 (0.032)
MG7 Basis for promoting non-mangers	0.025 (0.026)	0.024 (0.045)	0.027 (0.029)	−0.024 (0.021)	0.018 (0.032)	−0.042 (0.025)
MG8 When underperforming managers were dismissed or reassigned	0.053^** (0.022)	−0.051 (0.043)	0.064^*** (0.024)	0.025 (0.019)	−0.029 (0.022)	0.036 (0.022)
Controls	YES	YES	YES	YES	YES	YES
Country Fixed Effects	YES	YES	YES	YES	YES	YES
Year Fixed effects	YES	YES	YES	YES	YES	YES
Number of observations	8,470	2,554	5,916	5,988	1,988	4,000
Adjusted R²	0.217	0.253	0.208	0.179	0.193	0.173

Robustness - Accounting for Skills

Model	OLS - Country and Year Fixed Effects		Firm and Year Fixed Effects		OLS - Country and Year Fixed Effects		Firm and Year Fixed Effects

Outcome Variable	Firm offers formal training Y/N	Share of workers received formal training (0 if no training)	Firm offers formal training Y/N	Share of workers received formal training (0 if no training)	Firm offers formal training Y/N	Share of workers received formal training (0 if no training)	Firm offers formal training Y/N	Share of workers received formal training (0 if no training)

Sample Sector	Manf.	Manf.	Manf.	Manf.	Manf.	Manf.	Manf.	Manf.

Sample	MENA Firms - Pooled Cross section		MENA Firms - Panel		ECA Firms - Pooled Cross section		ECA Firms - Panel

	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Share of permanent full-time employees with a university degree (0 to 1)	0.443^*** (0.127)	0.324^*** (0.088)	0.348^*** (0.099)	0.362^*** (0.115)	0.102 (0.070)	0.103^* (0.054)	−0.386 (0.430)	−0.573^** (0.236)
Overall management score	0.117 (0.133)	−0.017 (0.084)	−0.361 (0.302)	−0.118 (0.226)	0.463^*** (0.072)	0.215^*** (0.050)	0.694^*** (0.246)	0.584^*** (0.128)
Share of High-Skilled Production Workers (manf only)	0.075 (0.077)	0.109^** (0.052)	0.056 (0.141)	0.212^* (0.112)	−0.076 (0.056)	−0.023 (0.041)	−0.097 (0.152)	−0.019 (0.139)
Control Variables	YES	YES	YES	YES	YES	YES	YES	YES
Country Fixed Effects	YES	YES	NO	NO	YES	YES	NO	NO
Firm Fixed Effects	NO	NO	YES	YES	NO	NO	YES	YES
Year Fixed Effects	YES	YES	YES	YES	YES	YES	YES	YES
Number of observations	1,953	1,902	392	376	3,954	3,835	817	787
Adjusted R²	0.238	0.199	0.299	0.252	0.218	0.155	0.301	0.236

Sample Composition

Economy	No. of Firms	Economy	No. of Firms
Albania	113	Lithuania	143
Armenia	134	Moldova	102
Azerbaijan	71	Montenegro	49
Belarus	238	Morocco	206
Bosnia and Herzegovina	141	North Macedonia	175
Bulgaria	134	Poland	189
Croatia	242	Romania	262
Czech Republic	223	Russian Federation	552
Egypt, Arab Rep.	1,506	Serbia	125
Estonia	96	Slovak Republic	169
Georgia	109	Slovenia	188
Hungary	287	Tajikistan	70
Jordan	179	Tunisia	357
Kazakhstan	356	Turkey	664
Kosovo	60	Ukraine	459
Kyrgyz Republic	170	Uzbekistan	264
Latvia	131	West Bank and Gaza	91
Lebanon	215

Robustness - Gender Composition of Workforce

Model	OLS - Country and Year Fixed Effects		Firm and Year Fixed Effects		OLS - Country and Year Fixed Effects		Firm and Year Fixed Effects

Outcome Variable	Firm offers formal training Y/N	Share of workers received formal training (0 if no training)	Firm offers formal training Y/N	Share of workers received formal training (0 if no training)	Firm offers formal training Y/N	Share of workers received formal training (0 if no training)	Firm offers formal training Y/N	Share of workers received formal training (0 if no training)

Sample Sector	All	Manf.	All	Manf.	All	Manf.	All	Manf.

Sample	MENA Firms - Pooled Cross section		MENA Firms - Panel		ECA Firms - Pooled Cross section		ECA Firms - Panel

	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Share of permanent full-time employees with a university degree (0 to 1)	0.539^*** (0.097)	0.346^*** (0.079)	0.278^* (0.166)	0.235^** (0.107)	0.189^*** (0.057)	0.095^* (0.051)	0.051 (0.486)	−0.478^** (0.218)
Overall management score	0.063 (0.100)	−0.037 (0.082)	−0.076 (0.262)	0.017 (0.073)	0.475^*** (0.053)	0.236^*** (0.049)	0.318 (0.203)	0.527^*** (0.131)
Proportion of permanent full-time workers that are female	0.099 (0.068)	0.001 (0.047)	0.177^*** (0.062)	0.184^** (0.080)	−0.059 (0.037)	−0.063^** (0.032)	−0.501^** (0.196)	−0.290^*** (0.102)
Control Variables	YES	YES	YES	YES	YES	YES	YES	YES
Country Fixed Effects	YES	YES	NO	NO	YES	YES	NO	NO
Firm Fixed Effects	NO	NO	YES	YES	NO	NO	YES	YES
Year Fixed Effects	YES	YES	YES	YES	YES	YES	YES	YES
Number of observations	2,472	1,955	529	385	5,718	3,901	1,209	804
Adjusted R²	0.257	0.197	0.267	0.240	0.210	0.160	0.260	0.271

Robustness - Regulation and Perceptions

Model	OLS - Country and Year Fixed Effects		Firm and Year Fixed Effects		OLS - Country and Year Fixed Effects		Firm and Year Fixed Effects

Outcome Variable	Firm offers formal training Y/N	Share of workers received formal training (0 if no training)	Firm offers formal training Y/N	Share of workers received formal training (0 if no training)	Firm offers formal training Y/N	Share of workers received formal training (0 if no training)	Firm offers formal training Y/N	Share of workers received formal training (0 if no training)

Sample Sector	All	Manf.	All	Manf.	All	Manf.	All	Manf.

Sample	MENA Firms - Pooled Cross section		MENA Firms - Panel		ECA Firms - Pooled Cross section		ECA Firms - Panel

	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Share of permanent full-time employees with a university degree (0 to 1)	0.466^*** (0.095)	0.300^*** (0.077)	0.239^*** (0.081)	0.227^*** (0.067)	0.186^*** (0.057)	0.104^** (0.051)	0.014 (0.522)	−0.531^** (0.207)
Overall management score	0.085 (0.103)	−0.050 (0.078)	0.172 (0.251)	0.124 (0.112)	0.460^*** (0.054)	0.244^*** (0.050)	0.466^** (0.206)	0.710^*** (0.169)
Inadequately Educated Workforce (cell average)	0.048 (0.148)	−0.366^** (0.148)	−0.049 (0.342)	−0.015 (0.223)	0.094 (0.060)	−0.014 (0.072)	0.053 (0.169)	−0.150 (0.218)
Labor Regulations obstacle (cell average)	0.287^* (0.156)	0.149 (0.095)	0.322 (0.393)	−0.063 (0.106)	0.100 (0.093)	0.154^* (0.082)	1.198^*** (0.399)	0.890^*** (0.317)
Control Variables	YES	YES	YES	YES	YES	YES	YES	YES
Country Fixed Effects	YES	YES	NO	NO	YES	YES	NO	NO
Firm Fixed Effects	NO	NO	YES	YES	NO	NO	YES	YES
Year Fixed Effects	YES	YES	YES	YES	YES	YES	YES	YES
Number of observations	2,616	2,043	552	401	5,943	4,024	1,260	833
Adjusted R²	0.238	0.197	0.237	0.197	0.202	0.158	0.235	0.282

Determinants of Formal Training

Model	OLS

Outcome Variable	Firm offers formal training Y/N			Share of workers received formal training (0 if no training)

Sample	All Firms	MENA 2013–2019	ECA 2013–2019	Manf. Firms	MENA Manf. Firms (2013–2019)	ECA Manf. Firms (2013–2019)

	(1)	(2)	(3)	(4)	(5)	(6)
Share of permanent full-time employees with a university degree (0 to 1)	0.257^*** (0.051)	0.486^*** (0.094)	0.193^*** (0.057)	0.164^*** (0.045)	0.332^*** (0.080)	0.108^** (0.052)
Overall management score	0.376^*** (0.048)	0.072 (0.101)	0.454^*** (0.054)	0.177^*** (0.043)	−0.038 (0.080)	0.233^*** (0.049)
Top manager experience in sector (years)	0.000 (0.001)	−0.005^*** (0.002)	0.002 (0.001)	0.001^* (0.001)	−0.001 (0.001)	0.002^* (0.001)
Log of age of firm	−0.018 (0.016)	0.036 (0.024)	−0.028 (0.018)	−0.012 (0.013)	0.018 (0.017)	−0.019 (0.015)
Proportion of temporary workers (out of all workers)	−0.044 (0.156)	−0.122 (0.175)	−0.013 (0.183)	−0.159^** (0.078)	0.098 (0.185)	−0.243^*** (0.078)
Log of size	0.050^*** (0.012)	0.040^* (0.024)	0.048^*** (0.014)	0.004 (0.009)	−0.010 (0.020)	0.005 (0.010)
Senior management time spent in dealing with requirements of government regulations (%)	0.001 (0.001)	−0.001 (0.001)	0.001^* (0.001)	0.000 (0.000)	−0.000 (0.001)	0.001 (0.001)
Average number of visits or required meetings with tax officials	0.002 (0.004)	0.034^* (0.019)	−0.002 (0.004)	0.001 (0.004)	0.008 (0.006)	−0.001 (0.004)
Firm purchased fixed assets Y/N	0.145^*** (0.020)	0.112^*** (0.042)	0.149^*** (0.022)	0.084^*** (0.016)	0.060^* (0.031)	0.086^*** (0.019)
Direct exports 10% or more of sales Y/N	−0.012 (0.024)	−0.064 (0.041)	0.008 (0.028)	−0.013 (0.018)	−0.024 (0.029)	−0.007 (0.023)
Foreign ownership Y/N	0.058^** (0.027)	0.019 (0.062)	0.068^** (0.029)	0.003 (0.022)	0.016 (0.043)	0.004 (0.025)
Female top manager Y/N	0.010 (0.033)	0.034 (0.085)	0.005 (0.035)	0.005 (0.023)	−0.007 (0.043)	0.002 (0.024)
Establishment has checking or savings account Y/N	0.053 (0.040)	0.030 (0.064)	0.092^* (0.050)	0.024 (0.026)	0.018 (0.019)	0.023 (0.040)
ISO Certification Ownership Y/N	0.131^*** (0.025)	0.182^*** (0.054)	0.114^*** (0.028)	0.070^*** (0.017)	0.111^** (0.043)	0.060^*** (0.019)
Website Y/N	0.053^** (0.022)	0.013 (0.036)	0.068^*** (0.025)	0.005 (0.016)	0.003 (0.023)	0.006 (0.020)
Firm identifying inadequately educated workforce as a major or severe constraint	0.056^** (0.025)	0.028 (0.052)	0.058^** (0.028)	0.029 (0.022)	0.009 (0.038)	0.039 (0.025)
Firm identifying labor regulations as a major or severe constraint Y/N	0.032 (0.034)	−0.007 (0.053)	0.046 (0.039)	−0.010 (0.029)	−0.021 (0.031)	−0.006 (0.038)
Competes against unregistered firms Y/N	0.044^** (0.021)	−0.002 (0.036)	0.057^** (0.025)	0.025 (0.017)	0.007 (0.026)	0.033 (0.021)
Manufacturing Sector Y/N	−0.077^*** (0.023)	−0.013 (0.047)	−0.090^*** (0.026)
Constant	−0.329^*** (0.076)	−0.105 (0.160)	−0.254^** (0.105)	−0.154^*** (0.056)	−0.066 (0.090)	−0.120 (0.087)
Country Fixed Effects	YES	YES	YES	YES	YES	YES
Year Fixed effects	YES	YES	YES	YES	YES	YES
Number of observations	8,470	2,554	5,916	5,988	1,988	4,000
Adjusted R²	0.212	0.243	0.203	0.167	0.187	0.157

The human capital of firms and the formal training of workers

Figures & Tables

Figure 1

Figure 2

Figure 3

Figure 4

Figure 5

Figure 6

Robustness – Production Complexity and Competition

Summary Statistics - MENA 2013–2019 (pooled cross-section)

Summary Statistics - ECA 2013–2019 (pooled cross-section)

Characteristics of Training Firms

Summary Statistics - ECA Panel Sample

Determinants of Formal Training - MENA Panel Estimations

Summary Statistics - Full Sample

Summary Statistics - MENA Panel Sample

Management Practices and Formal Training in MENA by Level of Corruption and Financial Record Keeping

Determinants of Formal Training - ECA Panel Estimations

Management Practices Scoring

Determinants of Formal Training - Type of Management Score

Robustness - Accounting for Skills

Sample Composition

Robustness - Gender Composition of Workforce

Robustness - Regulation and Perceptions

Determinants of Formal Training

Paradigm

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