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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)

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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File URL: http://repec.business.uzh.ch/RePEc/iso/leadinghouse/0032_lhwpaper.pdf
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Bibliographic 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;

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References

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  1. Michael Waldman, 1983. "Job Assignments, Signalling nad Efficiency," UCLA Economics Working Papers 286, UCLA Department of Economics.
  2. Christian Dustmann & Uta Schönberg, 2009. "Training and Union Wages," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 363-376, May.
  3. Josef Fersterer & Jörn-Steffen Pischke & Rudolf Winter-Ebmer, 2008. "Returns to apprenticeship training in Austria: evidence from failed firms," LSE Research Online Documents on Economics 19380, London School of Economics and Political Science, LSE Library.
  4. Acemoglu, D. & Pischke, J.S., 1997. "The Structure of Wages and Investment in General Training," Working papers 97-24, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Paul Ryan & Lorna Unwin, 2001. "Apprenticeship in the British ‘Training Market’," National Institute Economic Review, National Institute of Economic and Social Research, vol. 178(1), pages 99-114, October.
  6. Robert Gibbons & Lawrence Katz, 1989. "Layoffs and Lemons," NBER Working Papers 2968, National Bureau of Economic Research, Inc.
  7. Adda, Jerome & Dustmann, Christian & Meghir, Costas & Robin, Jean-Marc, 2007. "Career Progression and Formal versus On-the-Job Training," CEPR Discussion Papers 6087, C.E.P.R. Discussion Papers.
  8. Acemoglu, Daron & Pischke, Jörn-Steffen, 1996. "Why do Firms Train? Theory and Evidence," CEPR Discussion Papers 1460, C.E.P.R. Discussion Papers.
  9. Bernhardt, Dan, 1995. "Strategic Promotion and Compensation," Review of Economic Studies, Wiley Blackwell, vol. 62(2), pages 315-39, April.
  10. Harhoff, Dietmar & Kane, Thomas J, 1996. "Is the German Apprenticeship System a Panacea for the US Labour Market?," CEPR Discussion Papers 1311, C.E.P.R. Discussion Papers.
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  12. Josef Fersterer & Jörn-Steffen Pischke, 2008. "Returns to Apprenticeship Training in Austria: Evidence from Failed Firms," CEE Discussion Papers 0088, Centre for the Economics of Education, LSE.
  13. 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.
  14. 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.
  15. Paul Ryan & Howard Gospel & Paul Lewis, 2007. "Large Employers and Apprenticeship Training in Britain," British Journal of Industrial Relations, London School of Economics, vol. 45(1), pages 127-153, 03.
  16. Bernd Fitzenberger & Astrid Kunze, 2005. "Vocational Training and Gender: Wages and Occupational Mobility among Young Workers," Oxford Review of Economic Policy, Oxford University Press, vol. 21(3), pages 392-415, Autumn.
  17. 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.
  18. Greenwald, Bruce C, 1986. "Adverse Selection in the Labour Market," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 325-47, July.
  19. James M. Malcomson & James W. Maw & Barry McCormick, 2002. "General Training by Firms, Apprentice Contracts, and Public Policy," CESifo Working Paper Series 696, CESifo Group Munich.
  20. Daron Acemoglu & Joern-Steffen Pischke, 1998. "Beyond Becker: Training in Imperfect Labor Markets," Working papers 98-12, Massachusetts Institute of Technology (MIT), Department of Economics.
  21. 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.
  22. 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, May.
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Citations

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Cited by:
  1. Jerome Adda & Christian Dustmann & Costas Meghir & Jean-Marc Robin, 2009. "Career progression and formal versus on-the-job training," IFS Working Papers W09/06, Institute for Fiscal Studies.
  2. Paul Ryan, 2011. "Apprenticeship: between theory and practice, school and workplace," Economics of Education Working Paper Series 0064, University of Zurich, Institute for Strategy and Business Economics (ISU), revised Oct 2011.
  3. Mühlemann, Samuel & Wolter, Stefan C. & Wüest, Adrian, 2009. "Apprenticeship Training and the Business Cycle," IZA Discussion Papers 4460, Institute for the Study of Labor (IZA).
  4. Barbara Mueller & Juerg Schweri, 2012. "The returns to occupation-specific human capital - Evidence from mobility after training," Economics of Education Working Paper Series 0081, University of Zurich, Institute for Strategy and Business Economics (ISU).
  5. Muehlemann, Samuel & Pfeifer, Harald & Walden, Günter & Wenzelmann, Felix & Wolter, Stefan C., 2010. "The financing of apprenticeship training in the light of labor market regulations," Labour Economics, Elsevier, vol. 17(5), pages 799-809, October.

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