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Training and Effort Dynamics in Apprenticeship

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  • Fudenberg, Drew
  • Rayo, Luis

Abstract

We study the design of careers by a principal who trains a cash-constrained agent, or apprentice, who is free to walk away at any time. The principal specifies time paths of knowledge transfer, effort provision, and task allocation, subject to the apprentice's continued participation. In the optimal contract, the apprentice pays for training by working for low or no wages and working inefficiently hard. The apprentice can work on both "skilled" (knowledge-complementary) and "unskilled" (knowledge-independent) tasks. If the principal specifies inefficiently much skilled effort at any time, she shortens the apprenticeship compared to its length when skilled effort is efficient. Otherwise, she specifies inefficiently much unskilled effort throughout and leaves the apprenticeship length unchanged. We then consider the effect of regulations that limit how hard the apprentice can work and how long the apprenticeship can last.

Suggested Citation

  • Fudenberg, Drew & Rayo, Luis, 2017. "Training and Effort Dynamics in Apprenticeship," CEPR Discussion Papers 12126, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12126
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    References listed on IDEAS

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    1. Daron Acemoglu & Jörn-Steffen Pischke, 1998. "Why Do Firms Train? Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 113(1), pages 79-119.
    2. Kumar, T Krishna, 1969. "The Existence of an Optimal Economic Policy," Econometrica, Econometric Society, vol. 37(4), pages 600-610, October.
    3. Daron Acemoglu, 1997. "Training and Innovation in an Imperfect Labour Market," Review of Economic Studies, Oxford University Press, vol. 64(3), pages 445-464.
    4. Katz, Eliakim & Ziderman, Adrian, 1990. "Shared investment in general training : the role of information," Policy Research Working Paper Series 535, The World Bank.
    5. Mary T. Coleman & John Pencavel, 1993. "Changes in Work Hours of Male Employees, 1940–1988," ILR Review, Cornell University, ILR School, vol. 46(2), pages 262-283, January.
    6. Landers, Renee M & Rebitzer, James B & Taylor, Lowell J, 1996. "Rat Race Redux: Adverse Selection in the Determination of Work Hours in Law Firms," American Economic Review, American Economic Association, vol. 86(3), pages 329-348, June.
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    Cited by:

    1. Haroon Mumtaz, 2017. "Does uncertainty affect real activity? Evidence from state-level," Working Papers 846, Queen Mary University of London, School of Economics and Finance.

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