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General Training by Firms, Apprentice Contracts, and Public Policy

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Author Info
James Malcomson
James W. Maw
Barry McCormick

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Abstract

Workers will not pay for general on-the-job training if contracts are not enforceable. Firms may if there are mobility frictions. Private information about worker productivities, however, prevents workers who quit receiving their marginal products elsewhere. Their new employers then receive external benefits from their training. In this paper, training firms increase profits by offering apprenticeships which commit firms to high wages for those trainees retained on completion. At these high wages, only good workers are retained. This signals their productivity and reduces the external benefits if they subsequently quit. Regulation of apprenticeship length (a historically important feature) enhances efficiency. Appropriate subsidies enhance it further. This paper is now published at the reference given below, however the unpublished appendices are available to be downloaded.

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Publisher Info
Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 086.

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Date of creation: 2002
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Handle: RePEc:oxf:wpaper:086

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Related research
Keywords: contract enforceability apprenticeships regulation

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Find related papers by JEL classification:
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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. Cantor, Richard, 1990. "Firm-Specific Training and Contract Length," Economica, London School of Economics and Political Science, vol. 57(225), pages 1-14, February. [Downloadable!] (restricted)
  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. Schlicht, Ekkehart, 1996. "Endogenous on-the-job training with moral hazard," Labour Economics, Elsevier, vol. 3(1), pages 81-92, August. [Downloadable!] (restricted)
  4. Dietmar Harhoff & Thomas J. Kane, 1993. "Financing Apprenticeship Training: Evidence from Germany," NBER Working Papers 4557, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Prendergast, Canice, 1993. "The Role of Promotion in Inducing Specific Human Capital Acquisition," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 523-34, May. [Downloadable!] (restricted)
  6. Booth, Alison L & Chatterji, Monojit, 1998. "Unions and Efficient Training," Economic Journal, Royal Economic Society, vol. 108(447), pages 328-43, March. [Downloadable!] (restricted)
  7. Dolton, Peter J, 1993. "The Economics of Youth Training in Britain," Economic Journal, Royal Economic Society, vol. 103(420), pages 1261-78, September. [Downloadable!] (restricted)
  8. Chang, Chun & Wang, Yijiang, 1996. "Human Capital Investment under Asymmetric Information: The Pigovian Conjecture Revisited," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 505-19, July. [Downloadable!] (restricted)
  9. Lynch, Lisa M, 1992. "Private-Sector Training and the Earnings of Young Workers," American Economic Review, American Economic Association, vol. 82(1), pages 299-312, March.
  10. Loewenstein, Mark A & Spletzer, James R, 1998. "Dividing the Costs and Returns to General Training," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 142-71, January. [Downloadable!] (restricted)
  11. 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)
  12. Hamilton, Gillian, 1996. "The Market for Montreal Apprentices: Contract Length and Information," Explorations in Economic History, Elsevier, vol. 33(4), pages 496-523, October. [Downloadable!] (restricted)
  13. 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)
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  14. Stevens, Margaret, 1994. "Labour Contracts and Efficiency in On-the-Job Training," Economic Journal, Royal Economic Society, vol. 104(423), pages 408-19, March. [Downloadable!] (restricted)
  15. Kahn, Charles & Huberman, Gur, 1988. "Two-sided Uncertainty and "Up-or-Out" Contracts," Journal of Labor Economics, University of Chicago Press, vol. 6(4), pages 423-44, October. [Downloadable!] (restricted)
  16. Benjamin Hermalin., 1990. "Adverse Selection, Short-Term Contracting, and the Underprovision of On-the-Job Training," Economics Working Papers 90-139, University of California at Berkeley.
    Other versions:
  17. Waldman, Michael, 1990. "Up-or-Out Contracts: A Signaling Perspective," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 230-50, April. [Downloadable!] (restricted)
    Other versions:
  18. Katz, Eliakim & Ziderman, Adrian, 1990. "Investment in General Training: The Role of Information and Labour Mobility," Economic Journal, Royal Economic Society, vol. 100(403), pages 1147-58, December. [Downloadable!] (restricted)
  19. Steedman, Hilary, 1993. "The Economics of Youth Training in Germany," Economic Journal, Royal Economic Society, vol. 103(420), pages 1279-91, September. [Downloadable!] (restricted)
  20. 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:
  21. Lynch, Lisa M, 1993. "The Economics of Youth Training in the United States," Economic Journal, Royal Economic Society, vol. 103(420), pages 1292-302, September. [Downloadable!] (restricted)
  22. Daron Acemoglu & Jörn-Steffen Pischke, 1998. "Why Do Firms Train? Theory And Evidence," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 78-118, February. [Downloadable!] (restricted)
    Other versions:
  23. Acemoglu, Daron, 1997. "Training and Innovation in an Imperfect Labour Market," Review of Economic Studies, Blackwell Publishing, vol. 64(3), pages 445-64, July. [Downloadable!] (restricted)
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. Kessler, Anke S. & Luelfesmann, Christoph, 2002. "The Theory of Human Capital Revisited: On the Interaction of General and Specific Investments," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  2. Cihan Bilginsoy, 2005. "Delivering Skills: Apprenticeship Program Sponsorship and Transition from Training," Working Paper Series, Department of Economics, University of Utah 2005_01, University of Utah, Department of Economics.
  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. V. Bhaskar & Steinar Holden, 2002. "Wage Differentiation via Subsidised General Training," Economics Discussion Papers 549, University of Essex, Department of Economics. [Downloadable!]
    Other versions:
  5. Booth, Alison L. & Francesconi, Marco & Zoega, Gylfi, 2002. "Oligopsony, Institutions and the Efficiency of General Training," IZA Discussion Papers 618, Institute for the Study of Labor (IZA). [Downloadable!]
  6. Pablo Casas-Arce, 2004. "Firm Provision of General Training and Specific Human Capital Acquisition," Economics Series Working Papers 198, University of Oxford, Department of Economics. [Downloadable!]
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This page was last updated on 2008-11-17.


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