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Apprenticeship Training and Commitment to Training Provision

Author

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  • Christian Dustmann

    () (Department of Economics, University College London)

  • Uta Schönberg

    () (Department of Economics, University of Rochester)

Abstract

Why do apprenticeship schemes work well in some countries, like Germany and Austria, but less so in others, like the UK? This paper argues that a necessary prerequisite for apprenticeship schemes to be successful is the enforceability of the apprenticeship contract, most notably the firm's ability to commit to training provision. We hypothesize that, by linking into an existing regulatory framework, firms in Germany are able to commit, while this may not be the case in countries that run apprenticeship schemes less successfully. To test our hypothesis, we develop a model where firms have an incentive to finance training because of wage compression due to firm-specificity and asymmetric information, and analyse it under both commitment and no commitment to training provision. Drawing on the model, we provide evidence that the German apprenticeship system is indeed characterised by commitment to training provision. We then simulate our model for values of firm-specificity and asymmetric information estimated from survey and administrative data. We find that training would be substantially lower under no commitment, at most 8 % of that under commitment. This is in line with our hypothesis.

Suggested Citation

  • Christian Dustmann & Uta Schönberg, 2007. "Apprenticeship Training and Commitment to Training Provision," Economics of Education Working Paper Series 0032, University of Zurich, Department of Business Administration (IBW).
  • Handle: RePEc:iso:educat:0032
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    File URL: http://repec.business.uzh.ch/RePEc/iso/leadinghouse/0032_lhwpaper.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Adda & Dustmann, 2004. "Career Progression and Formal versus on the Job Training," Econometric Society 2004 North American Winter Meetings 492, Econometric Society.
    2. Paul Ryan, 2011. "Apprenticeship: between theory and practice, school and workplace," Economics of Education Working Paper Series 0064, University of Zurich, Department of Business Administration (IBW), revised Oct 2011.
    3. Mühlemann, Samuel & Wolter, Stefan C. & Wüest, Adrian, 2009. "Apprenticeship Training and the Business Cycle," IZA Discussion Papers 4460, Institute for the Study of Labor (IZA).
    4. Barbara Mueller & Juerg Schweri, 2012. "The returns to occupation-specific human capital - Evidence from mobility after training," Economics of Education Working Paper Series 0081, University of Zurich, Department of Business Administration (IBW).
    5. Muehlemann, Samuel & Pfeifer, Harald & Walden, Günter & Wenzelmann, Felix & Wolter, Stefan C., 2010. "The financing of apprenticeship training in the light of labor market regulations," Labour Economics, Elsevier, vol. 17(5), pages 799-809, October.

    More about this item

    Keywords

    educational policies; training; wage compression;

    JEL classification:

    • I2 - Health, Education, and Welfare - - Education
    • M53 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Training
    • 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

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