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Apprenticeship Training and Commitment to Training Provision

  • Christian Dustmann


    (Department of Economics, University College London)

  • Uta Schönberg


    (Department of Economics, University of Rochester)

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.

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Paper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Economics of Education Working Paper Series with number 0032.

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Length: 54 pages
Date of creation: Jul 2007
Date of revision:
Handle: RePEc:iso:educat:0032
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  2. Josef Fersterer & Jörn-Steffen Pischke & Rudolf Winter-Ebmer, 2008. "Returns to apprenticeship training in Austria: evidence from failed firms," LSE Research Online Documents on Economics 19380, London School of Economics and Political Science, LSE Library.
  3. Alison L. Booth & Mark L. Bryan, 2005. "Testing Some Predictions of Human Capital Theory: New Training Evidence from Britain," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 391-394, May.
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  16. Bernhardt, Dan, 1995. "Strategic Promotion and Compensation," Review of Economic Studies, Wiley Blackwell, vol. 62(2), pages 315-39, April.
  17. Harhoff, Dietmar & Kane, Thomas J, 1996. "Is the German Apprenticeship System a Panacea for the US Labour Market?," CEPR Discussion Papers 1311, C.E.P.R. Discussion Papers.
  18. Christian Dustmann & Uta Schönberg, 2009. "Training and Union Wages," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 363-376, May.
  19. Paul Ryan & Lorna Unwin, 2001. "Apprenticeship in the British ‘Training Market’," National Institute Economic Review, National Institute of Economic and Social Research, vol. 178(1), pages 99-114, October.
  20. Josef Fersterer & Jörn-Steffen Pischke, 2008. "Returns to Apprenticeship Training in Austria: Evidence from Failed Firms," CEE Discussion Papers 0088, Centre for the Economics of Education, LSE.
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