Standard economic theory predicts that firms will not invest in general training and will underinvest in specific training. Empirical evidence, however, indicates that firms do invest in general training of their workers. Evidence from laboratory experiments points to less underinvestment in...

In 1982 the duration of university education in the Netherlands was reduced from five to four years. This institutional reform is here used to estimate the causal effect of one year of university education on wages. I find that the fifth year of university education increased wages by 7%-9%....