Workplace training and manufacturing wage growth: evidence from the Ethiopian industrial parks

This paper uses novel data from Ethiopian industrial parks to examine the impact of on-the-job training (OJT) on wage growth in manufacturing. Employing OLS and propensity score matching techniques on a unique employer-employee matched dataset, we find that OJT participation increases the probability of wage growth by 30–36% points, with effects robust to extensive controls. The wage effects operate through dual channels: enhanced technical competencies – particularly in specialized domains like ironing and factory cognitive skills – and improved conscientiousness, a key noncognitive trait linked to productivity. Heterogeneity analyses reveal substantially larger returns for male workers (coefficient of 0.714 versus 0.324 for females), younger employees, line workers, and those in parks with centralized labor allocation systems. This evidence suggests important complementarities between skill investments and institutional design while highlighting potential gender disparities in training benefits. Our findings contribute to understanding skill formation mechanisms in newly industrializing contexts, with implications for designing industrial policies that effectively distribute productivity gains between firms and workers. The results demonstrate how strategic skill investments can promote both industrial competitiveness and wage growth in labor-abundant developing economies.