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Financing Apprenticeship Training: Evidence from Germany

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  • Dietmar Harhoff
  • Thomas J. Kane

Abstract

Much of the current discussion promoting apprenticeship programs in the U.S. proceeds as if it is simply a matter of historical accident or lack of imagination which has hindered human capital investment by U.S. firms. However, the cause may be rooted more deeply in our labor market institutions. This paper discusses the structure of incentives undergirding the German system of apprenticeship training. Many German firms face large net costs of apprenticeship training. Yet they continue to provide such training in spite of considerable worker turnover upon completion of the training. The simplest human capital model suggests that employers would be willing to finance only firm-specific training. Rather than engage in a futile debate over the general or specific nature of the skills being provided, we first describe and evaluate 3 characteristics of the German labor market which may lead firms to accept part of the cost of general training even in the face of worker turnover. We then attempt to understand why German workers and firms may be more willing to invest even in firm-specific skills than in the U.S.. Finally, we discuss some implications of these results for the current vocational training debate in the U.S..

Suggested Citation

  • Dietmar Harhoff & Thomas J. Kane, 1993. "Financing Apprenticeship Training: Evidence from Germany," NBER Working Papers 4557, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4557
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    1. Katharine G. Abraham & Susan N. Houseman, 1993. "Job Security in America: Lessons from Germany," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number kagsnh1993, November.
    2. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-620, September.
    3. James Heckman, 1993. "Assessing Clinton's Program on Job Training, Workfare, and Education in the Workplace," NBER Working Papers 4428, National Bureau of Economic Research, Inc.
    4. Jovanovic, Boyan, 1979. "Firm-specific Capital and Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1246-1260, December.
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    Cited by:

    1. Raghuram G. Rajan & Luigi Zingales, 2001. "The Firm as a Dedicated Hierarchy: A Theory of the Origins and Growth of Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 116(3), pages 805-851.
    2. Malcomson, James M. & Maw, James W. & McCormick, Barry, 2000. "General training by firms, apprentice contracts, and public policy," Discussion Paper Series In Economics And Econometrics 0021, Economics Division, School of Social Sciences, University of Southampton.
    3. Jörn-Steffen Pischke, 2001. "Continuous training in Germany," Journal of Population Economics, Springer;European Society for Population Economics, vol. 14(3), pages 523-548.
    4. Franz, Wolfgang & Soskice, David W., 1994. "The German apprenticeship system," Discussion Papers 11, University of Konstanz, Center for International Labor Economics (CILE).
    5. Rendall, Michelle & Weiss, Franziska J., 2016. "Employment polarization and the role of the apprenticeship system," European Economic Review, Elsevier, vol. 82(C), pages 166-186.
    6. Daron Acemoglu & Jörn-Steffen Pischke, 1998. "Why Do Firms Train? Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 113(1), pages 79-119.
    7. Clark, Damon & Fahr, René, 2001. "The Promise of Workplace Training for Non-College-Bound Youth: Theory and Evidence from German Apprenticeship," IZA Discussion Papers 378, Institute for the Study of Labor (IZA).
    8. Locke, Richard M., 1959- & Jacoby, Wade., 1995. "The dilemmas of diffusion : institutional transfer and the remaking of vocational training practices in Eastern Germany," Working papers 3846-95., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    9. Oskamp, Frank & Snower, Dennis J., 2007. "Interactions between employment and training policies," Kiel Working Papers 1389, Kiel Institute for the World Economy (IfW).
    10. Lars Vilhuber, 1999. "Sector-Specific Training and Mobility in Germany," CIRANO Working Papers 99s-03, CIRANO.
    11. Lars Vilhuber, 1999. "Continuous Training and Sectoral Mobility in Germany, Evidence from the 1990s," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 68(2), pages 209-214.
    12. Giulio Fella, 2000. "Investment in General Training with Consensual Layoffs," Working Papers 418, Queen Mary University of London, School of Economics and Finance.
    13. Inkmann, Joachim & Klotz, Stefan & Pohlmeier, Winfried, 1998. "Growing into Work - Pseudo Panel Data Evidence on Labor Market Entrance in Germany," ZEW Discussion Papers 98-47, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    14. Giulio Fella, 2014. "Investment in General Training with Consensual Layoffs," Working Papers 418, Queen Mary University of London, School of Economics and Finance.
    15. Clark, Damon, 2002. "Matching, Screening and Firm Investment in General Training: Theory and Evidence," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 A2-4, International Conferences on Panel Data.

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