Does human capital theory govern the relationship between training provision and the business cycle? Evidence from Switzerland

This presentation evaluates the causal impact of business cycle fluctuations on the supply of dual vocational education and training positions. Human capital theory asserts training is procyclical; firms reduce training expenditure amid economic downturns as future cash flows become increasingly uncertain, affecting labor demand dynamics. A conflicting strand of literature asserts that training provision is countercyclical. In recessions, the cost of labor inputs diminishes as labor markets become looser. Firms durably secure their future labor force at cheaper prices. We execute multiway fixed-effects regressions applied to both Swiss survey and administrative data, using unemployment, and subsequently the Swiss KOF business situation indicator, as proxies for the business cycle. Unemployment is consistently negatively, however insignificantly, related to the supply of dual VET positions. On the other hand, the sign of the effect of the business situation indicator on the supply of dual VET positions varies, albeit in our sample, the business situation indicator does not significantly affect the supply of dual VET positions. We do not find evidence that the impact of the business cycle, as proxied by the aforementioned variables, on dual VET positions supply is significantly heterogenous between knowledge-intensive and nonknowledge-intensive business services sectors. The impact of the business situation indicator on the supply of dual VET positions is significantly more negative on the construction sector than in the manufacturing sector; however, this impact is not heterogeneous across other sectors.