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Apprenticeship Training and Commitment to Training Provision

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Author Info
Christian Dustmann () (Department of Economics, University College London)
Uta Schönberg () (Department of Economics, University of Rochester)

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Abstract

Why do apprenticeship schemes work well in some countries, like Germany and Austria, but less so in others, like the UK? This paper argues that a necessary prerequisite for apprenticeship schemes to be successful is the enforceability of the apprenticeship contract, most notably the firm's ability to commit to training provision. We hypothesize that, by linking into an existing regulatory framework, firms in Germany are able to commit, while this may not be the case in countries that run apprenticeship schemes less successfully. To test our hypothesis, we develop a model where firms have an incentive to finance training because of wage compression due to firm-specificity and asymmetric information, and analyse it under both commitment and no commitment to training provision. Drawing on the model, we provide evidence that the German apprenticeship system is indeed characterised by commitment to training provision. We then simulate our model for values of firm-specificity and asymmetric information estimated from survey and administrative data. We find that training would be substantially lower under no commitment, at most 8 % of that under commitment. This is in line with our hypothesis.

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Publisher Info
Paper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Economics of Education Working Paper Series with number 0032.

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Length: 54 pages
Date of creation: Jul 2007
Date of revision:
Handle: RePEc:iso:educat:0032

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Related research
Keywords: educational policies; training; wage compression;

Other versions of this item:

Find related papers by JEL classification:
I2 - Health, Education, and Welfare - - Education
M53 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Training
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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  1. Acemoglu, Daron & Pischke, Jörn-Steffen, 1996. "Why do Firms Train? Theory and Evidence," CEPR Discussion Papers 1460, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Stevens, Margaret, 1994. "An Investment Model for the Supply of Training by Employers," Economic Journal, Royal Economic Society, vol. 104(424), pages 556-70, May. [Downloadable!] (restricted)
  3. Dustmann; Christian & Schönberg, Uta, 2004. "Training and Union Wages," IZA Discussion Papers 1435, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Josef Fersterer & Jörn-Steffen Pischke & Rudolf Winter-Ebmer, 2007. "Returns to Apprenticeship Training in Austria: Evidence from Failed Firms," IZA Discussion Papers 3104, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  5. Jérôme Adda & Christian Dustmann & Costas Meghir & Jean-Marc Robin, 2006. "Career Progression and Formal versus On-the-Job Training," IZA Discussion Papers 2260, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  6. Michael Waldman, 1984. "Job Assignments, Signalling, and Efficiency," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 255-267, Summer. [Downloadable!] (restricted)
    Other versions:
  7. Gibbons, Robert & Katz, Lawrence F, 1991. "Layoffs and Lemons," Journal of Labor Economics, University of Chicago Press, vol. 9(4), pages 351-80, October. [Downloadable!] (restricted)
    Other versions:
  8. Greenwald, Bruce C, 1986. "Adverse Selection in the Labour Market," Review of Economic Studies, Blackwell Publishing, vol. 53(3), pages 325-47, July. [Downloadable!] (restricted)
  9. Acemoglu, Daron & Pischke, Jorn-Steffen, 1999. "Beyond Becker: Training in Imperfect Labour Markets," Economic Journal, Royal Economic Society, vol. 109(453), pages F112-42, February. [Downloadable!] (restricted)
    Other versions:
  10. Stevens, Margaret, 1994. "A Theoretical Model of On-the-Job Training with Imperfect Competition," Oxford Economic Papers, Oxford University Press, vol. 46(4), pages 537-62, October. [Downloadable!] (restricted)
  11. David Soskice, 1994. "Reconciling Markets and Institutions: The German Apprenticeship System," NBER Chapters, in: Training and the Private Sector, pages 25-60 National Bureau of Economic Research, Inc. [Downloadable!]
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    Other versions:
  13. DiNardo, John E & Pischke, Jorn-Steffen, 1997. "The Returns to Computer Use Revisited: Have Pencils Changed the Wage Structure Too?," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 291-303, February.
    Other versions:
  14. Alison L. Booth & Mark L. Bryan, 2005. "Testing Some Predictions of Human Capital Theory: New Training Evidence from Britain," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 391-394, 06. [Downloadable!] (restricted)
  15. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 539-572, June. [Downloadable!] (restricted)
    Other versions:
  16. Juan F. Jimeno & Diego Rodríguez-Palenzuela, 2003. "Youth Unemployment in the OECD: Demographic Shifts, Labour Market Institutions and Macroeconomic Shocks," Economics Working Papers 019, European Network of Economic Policy Research Institutes. [Downloadable!]
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  17. Thomas J. Kane & Dietmar Harhoff, 1997. "Is the German apprenticeship system a panacea for the U.S. labor market?," Journal of Population Economics, Springer, vol. 10(2), pages 171-196. [Downloadable!] (restricted)
    Other versions:
  18. Bernhardt, Dan, 1995. "Strategic Promotion and Compensation," Review of Economic Studies, Blackwell Publishing, vol. 62(2), pages 315-39, April. [Downloadable!] (restricted)
  19. Paul Ryan & Howard Gospel & Paul Lewis, 2007. "Large Employers and Apprenticeship Training in Britain," British Journal of Industrial Relations, Blackwell Publishers Ltd/London School of Economics, vol. 45(1), pages 127-153, 03. [Downloadable!] (restricted)
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