On-the-job Training, Human Capital Accumulation and Innovation

This article analyses the role of On-the-Job Training - viewed as an investment - in human capital accumulation, its interaction with schooling decisions and its impact on innovation activities. For this purpose, we construct an endogenous innovation model which takes into account two types of formation in human capital accumulation : schooling and On-the-Job Training. On-the-Job Training, such as apprenticeship program, is a formalized as a time-allocation problem. We show that, despite different rates of schooling, two quite similar economies may experience the same rate of growth in the long run, a great part of human capital accumulation being explained by On-the-Job Training. Nevertheless, their transition towards the long run equilibrium may be very different. We also show that, the degree of subsitution between the two forms of education modifies both the long run equilibrium and the dynamics during the transition. Implications for innovation are also important, because innovative activities rely on the reallocation of human capital between human capital accumulation and production which is very sensitive to the degree of substitution.