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Should Firms be Required to Pay for Vocational Training?

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  • Stevens, Margaret

Abstract

Failure in the training market may result from credit constraints and the inability to insure against labour income uncertainty, deterring potential trainees, or labour market imperfections that create external benefits for firms. This paper constructs a model of a training market affected by both problems, and examines the rationale for training levy schemes, intended to make firms increase investment in vocational training. It is shown that regulating firms, or equivalently financing a subsidy by taxation of profits, can achieve a Pareto improvement irrespective of the cause of under-investment. However, when the levy is assessed as a proportion of wages the effect is to address capital market imperfections only.

Suggested Citation

  • Stevens, Margaret, 1999. "Should Firms be Required to Pay for Vocational Training?," CEPR Discussion Papers 2099, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2099
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    References listed on IDEAS

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    1. Jones, Ian, 1988. "An Evaluation of YTS," Oxford Review of Economic Policy, Oxford University Press, vol. 4(3), pages 54-71, Autumn.
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    Cited by:

    1. Mohrenweiser, Jens, 2016. "Recruitment and apprenticeship training," Industrielle Beziehungen - Zeitschrift fuer Arbeit, Organisation und Management - The German Journal of Industrial Relations, Rainer Hampp Verlag, vol. 23(1), pages 6-24.
    2. Samuel Muehlemann & Paul Ryan & Stefan C. Wolter, 2013. "Monopsony Power, Pay Structure, and Training," ILR Review, Cornell University, ILR School, vol. 66(5), pages 1097-1114, October.
    3. Giulio Pedrini, 2017. "Law and economics of training: a taxonomy of the main legal and institutional tools addressing suboptimal investments in human capital development," European Journal of Law and Economics, Springer, vol. 43(1), pages 83-105, February.
    4. Alexandre Léné, 2002. "Enterprise-related training and poaching externalities," Post-Print halshs-00150509, HAL.
    5. Picchio, Matteo & van Ours, Jan C., 2011. "Market imperfections and firm-sponsored training," Labour Economics, Elsevier, vol. 18(5), pages 712-722, October.
    6. Mohrenweiser, Jens & Zwick, Thomas & Backes-Gellner, Uschi, 2013. "Poaching and firm-sponsored training: First clean evidence," ZEW Discussion Papers 13-037, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    7. Andrea Bassanini & Wooseok Ok, 2004. "How do firms' and individuals' incentives to invest in human capital vary across groups?," Working Papers halshs-00194344, HAL.
    8. Espen R. Moen & Åsa Rosén, 2004. "Does Poaching Distort Training?," Review of Economic Studies, Oxford University Press, vol. 71(4), pages 1143-1162.
    9. Bert Minne & Marc van der Steeg & Dinand Webbink, 2008. "Skill gaps in the EU: role for education and training policies," CPB Document 162, CPB Netherlands Bureau for Economic Policy Analysis.
    10. Yanick Labrie & Claude Montmarquette, 2005. "La formation qualifiante et transférable en milieu de travail," CIRANO Project Reports 2005rp-04, CIRANO.
    11. Naoki Shintoyo, 2010. "Worker-financed versus Firm-sponsored Training: How are Skilled Workers Supplied to the Economy?," Economica, London School of Economics and Political Science, vol. 77(305), pages 110-127, January.
    12. repec:bla:ecinqu:v:55:y:2017:i:1:p:305-318 is not listed on IDEAS
    13. Jo Blanden & Franz Buscha & Patrick Sturgis & Peter Urwin, 2010. "Measuring the Returns to Lifelong Learning," CEE Discussion Papers 0110, Centre for the Economics of Education, LSE.
    14. Holger Görg & Eric Strobl, 2006. "Do Government Subsidies Stimulate Training Expenditure? Microeconometric Evidence from Plant-Level Data," Southern Economic Journal, Southern Economic Association, vol. 72(4), pages 860-876, April.
    15. Bilanakosa, Christos & Heywood, John S. & Sessions, John & Theodoropoulos, Nikolaos, 2017. "Worker Training and Quality Competition," GLO Discussion Paper Series 137, Global Labor Organization (GLO).
    16. Andrew Sharpe & James Gibson, 2005. "The Apprenticeship System in Canada: Trends and Issues," CSLS Research Reports 2005-04, Centre for the Study of Living Standards.
    17. Giorgio Brunello & Maria De Paola, 2004. "Market Failures and the Under-Provision of Training," CESifo Working Paper Series 1286, CESifo Group Munich.
    18. Karsten Albæk, 2010. "On the Incidence of Employment Subsidies to Vocational Training," CAM Working Papers 2010-02, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
    19. Christian Holzner, 2005. "Search Frictions, Credit Constraints and Firm Financed General Training," ifo Working Paper Series 6, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    20. Floreani, Vincent Arthur, 2014. "Fixing Europe's youth unemployment and skills mismatch, can public financial support to SMEs be effective? The case of the European Commission and European Investment Bank joint initiatives," MPRA Paper 55849, University Library of Munich, Germany.

    More about this item

    Keywords

    Credit Constraints; human capital investment; labour market frictions; Uncertainty; vocational training;

    JEL classification:

    • 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
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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