Locus of Control and Investment in Training

Abstract:

We extend standard models of work-related training by explicitly incorporating workers’ locus of control into the investment decision through the returns they expect. Our model predicts that higher internal control results in increased take-up of general, but not specific, training. This prediction is empirically validated using data from the German Socioeconomic Panel (SOEP). We provide empirical evidence that locus of control influences participation in training through its effect on workers’ expectations about future wage increases rather than actual wage increases. Our results provide an important explanation for under-investment in training and suggest that those with an external sense of control may require additional training support.