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Career Progression and Formal versus on the Job Training

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Author Info
Adda
Dustmann

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Abstract

This paper evaluates the return to formal education over the life-cycle and compare it to informal, on the job training. More specifically, we assess the apprenticeship system in Germany by comparing the long run value of education choices and subsequent labor market outcomes for apprentices and non-apprentices. We develop a structural model of career progression and educational choice, allowing for unobserved ability, endogenous job to job transition, specific firm-worker matches, specific returns to tenure and to general experience. We estimate this model on a large panel data set which describes the career progression of young Germans. We find that formal education is more important than informal training, even when taking into account for the possible selection into education. We use the estimated model to evaluate the long-run impact of labor market policies on educational choices and career progression. We find that policies such as the Earned Income Tax Credit which subsidize low wage have a detrimental effect on the probability of further education and on job mobility.

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Paper provided by Econometric Society in its series Econometric Society 2004 North American Winter Meetings with number 492.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:nawm04:492

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Related research
Keywords: return to education; wages; labor mobility; in work benefits;

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Find related papers by JEL classification:
I2 - Health, Education, and Welfare - - Education
J6 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Donghoon Lee, 2005. "An Estimable Dynamic General Equilibrium Model Of Work, Schooling, And Occupational Choice," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 1-34, 02. [Downloadable!] (restricted)
  2. Willis, Robert J & Rosen, Sherwin, 1979. "Education and Self-Selection," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S7-36, October. [Downloadable!] (restricted)
    Other versions:
  3. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage Bargaining with On-the-Job Search: Theory and Evidence," Econometrica, Econometric Society, vol. 74(2), pages 323-364, 03. [Downloadable!] (restricted)
    Other versions:
  4. Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts of American Males," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 262-333, April. [Downloadable!] (restricted)
  5. Hamish Low & Costas Meghir & Luigi Pistaferri, 2006. "Wage risk and employment risk over the life cycle," IFS Working Papers W06/27, Institute for Fiscal Studies. [Downloadable!]
    Other versions:
  6. James Heckman & Lance Lochner & Ricardo Cossa, 2002. "Learning-By-Doing Vs. On-the-Job Training: Using Variation Induced by the EITC to Distinguish Between Models of Skill Formation," NBER Working Papers 9083, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Keane, Michael P & Wolpin, Kenneth I, 2000. "Eliminating Race Differences in School Attainment and Labor Market Success," Journal of Labor Economics, University of Chicago Press, vol. 18(4), pages 614-52, October. [Downloadable!] (restricted)
    Other versions:
  8. Christian Dustmann & Costas Meghir, 2001. "Wages, experience and seniority," IFS Working Papers W01/01, Institute for Fiscal Studies. [Downloadable!]
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  9. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Blackwell Publishing, vol. 61(3), pages 397-415, July. [Downloadable!] (restricted)
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  10. Tauchen, George & Hussey, Robert, 1991. "Quadrature-Based Methods for Obtaining Approximate Solutions to Nonlinear Asset Pricing Models," Econometrica, Econometric Society, vol. 59(2), pages 371-96, March. [Downloadable!] (restricted)
  11. Heckman, James J & Ichimura, Hidehiko & Todd, Petra, 1998. "Matching as an Econometric Evaluation Estimator," Review of Economic Studies, Blackwell Publishing, vol. 65(2), pages 261-94, April. [Downloadable!] (restricted)
  12. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-75, March. [Downloadable!] (restricted)
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  13. Fabien Postel-Vinay & Hélène Turon, 2005. "On-the-job search, productivity shocks, and the individual earnings process," PSE Working Papers 2005-31, PSE (Ecole normale supérieure). [Downloadable!]
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  14. James Heckman, 1993. "Assessing Clinton's Program on Job Training, Workfare, and Education in the Workplace," NBER Working Papers 4428, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  15. Heckman, James J & Sedlacek, Guilherme, 1985. "Heterogeneity, Aggregation, and Market Wage Functions: An Empirical Model of Self-selection in the Labor Market," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1077-1125, December. [Downloadable!] (restricted)
  16. Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-60, September.
    Other versions:
  17. Margaret Stevens, 2004. "Wage-Tenure Contracts in a Frictional Labour Market: Firms' Strategies for Recruitment and Retention," Review of Economic Studies, Blackwell Publishing, vol. 71(2), pages 535-551, 04. [Downloadable!] (restricted)
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  18. Topel, Robert H & Ward, Michael P, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 439-79, May. [Downloadable!] (restricted)
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  19. Altonji, Joseph G & Shakotko, Robert A, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Blackwell Publishing, vol. 54(3), pages 437-59, July. [Downloadable!] (restricted)
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  20. Taber, Christopher R, 2001. "The Rising College Premium in the Eighties: Return to College or Return to Unobserved Ability?," Review of Economic Studies, Blackwell Publishing, vol. 68(3), pages 665-91, July.
  21. Zvi Eckstein & Kenneth I. Wolpin, 1999. "Why Youths Drop Out of High School: The Impact of Preferences, Opportunities, and Abilities," Econometrica, Econometric Society, vol. 67(6), pages 1295-1340, November.
  22. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352. [Downloadable!] (restricted)
  23. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-76, February. [Downloadable!] (restricted)
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  24. Keane, Michael P & Wolpin, Kenneth I, 1997. "The Career Decisions of Young Men," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 473-522, June.
    Other versions:
  25. Richard Blundell & Monica Costa Dias & Costas Meghir & John Van Reenen, 2001. "Evaluating the employment impact of a mandatory job search assistance program," IFS Working Papers W01/20, Institute for Fiscal Studies. [Downloadable!]
  26. James J. Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explorations with a Dynamic General Equilibrium Model of Labor Earnings with Heterogeneous Agents," NBER Working Papers 6384, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Matilde Bombardini & Giovanni Gallipoli & Germán Pupato, 2009. "Skill Dispersion and Trade Flows," NBER Working Papers 15097, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Stephen Machin, 2008. "The new economics of education: methods, evidence and policy," Journal of Population Economics, Springer, vol. 21(1), pages 1-19, January. [Downloadable!] (restricted)
  3. Christian Dustmann & Uta Schönberg, 2007. "Apprenticeship Training and Commitment to Training Provision," Economics of Education Working Paper Series 0032, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
  4. Haan, Peter & Prowse, Victoria L. & Uhlendorff, Arne, 2008. "Employment Effects of Welfare Reforms: Evidence from a Dynamic Structural Life-Cycle Model," IZA Discussion Papers 3480, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  5. Carlin, Wendy & Soskice, David, 2007. "Reforms, Macroeconomic Policy and Economic Performance in Germany," CEPR Discussion Papers 6415, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. Costas Meghir, 2006. "Dynamic models for policy evaluation," IFS Working Papers W06/08, Institute for Fiscal Studies. [Downloadable!]
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