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Spillovers in Vocational Training

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  • Bornemann, Stefan

Abstract

The German apprenticeship system is often considered a role model for vocational education. Its influence on economic growth and technological progress through the provision of human capital to the workforce is widely acknowledged. But recent declines in the number of apprenticeships have led to increasing unrest among policy makers. To counter this development, the government is considering to introduce a training levy scheme that collects training levies from non-training firms in order to subsidize apprenticeship training ("Ausbildungsplatzabgabe"). Such training levy schemes already exist in several industrialized countries and even in some sectors in Germany. Yet, economists differ greatly in opinion about this policy. More surprisingly, however, a general economic analysis of this policy instrument is still lacking. Recent contributions have relied on rather qualitative and partial analyses. This paper aims at closing this gap. Following the training literature, we use a simple oligopsonistic labor market model. Such a setting allows to explain why firms provide and (at least partially) finance general vocational training. Moreover, it can demonstrate that a positive externality arises as other firms benefit from vocational training through poaching. In principle, the Pigouvian prescription of a subsidy scheme financed by a non-distortionary tax could restore the social optimum. The proposed training levy scheme, by contrast, is a particular scheme that links subsidies and levies. This paper unveils that it basically corresponds to a uniform subsidy on apprenticeship training that is financed by a distortionary tax on labor. We show that introducing such a levy scheme can entail ambiguous repercussions on general welfare.

Suggested Citation

  • Bornemann, Stefan, 2005. "Spillovers in Vocational Training," Discussion Papers in Economics 693, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenec:693
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Vocational Training; Frictional Labor Markets; Poaching; Levy-Grant-Scheme; Training levy;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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