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Career progression and formal versus on-the-job training

  • Jerome Adda


    (Institute for Fiscal Studies and Bocconi University)

  • Christian Dustmann


    (Institute for Fiscal Studies and University College London)

  • Costas Meghir


    (Institute for Fiscal Studies and Yale University)

  • Jean-Marc Robin


    (Institute for Fiscal Studies and cemmap and Sciences Po)

We model the choice of individuals to follow or not apprenticeship training and their subsequent career. We use German administrative data, which records education, labour market transitions and wages to estimate a dynamic discrete choice model of training choice, employment and wage growth. The model allows for returns to experience and tenure, match specific effects, job mobility and search frictions. We show how apprenticeship training affects labour market careers and we quantify its benefits, relative to the overall costs. We then use our model to show how two welfare reforms change life-cycle decisions and human capital accumulation: One is the introduction of an Earned Income Tax Credit in Germany, and the other is a reform to Unemployment Insurance. In both reforms we find very significant impacts of the policy on training choices and on the value of realized matches, demonstrating the importance of considering such longer term implications.

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Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W09/06.

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Date of creation: 27 Jan 2009
Date of revision:
Handle: RePEc:ifs:ifsewp:09/06
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