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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
    as

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    References listed on IDEAS

    as
    1. Jones, Ian, 1988. "An Evaluation of YTS," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 4(3), pages 54-71, Autumn.
    Full references (including those not matched with items on IDEAS)

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    1. Andrews, Martyn & Bradley, Steve & Upward, Richard, 1999. "Estimating Youth Training Wage Differentials during and after Training," Oxford Economic Papers, Oxford University Press, vol. 51(3), pages 517-544, July.
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    3. Stevens, Margaret, 2001. "Should Firms Be Required to Pay for Vocational Training?," Economic Journal, Royal Economic Society, vol. 111(473), pages 485-505, July.

    More about this item

    Keywords

    Credit Constraints; human capital investment; labour market frictions; Uncertainty; vocational training;
    All these keywords.

    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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