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The Effects of Mandating Training in Firms: Theory and Evidence from the Colombian Apprenticeship Program

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  • Santiago Caicedo

    (University of Chicago)

  • Arthur Seibold

    (University of Mannheim)

  • Miguel Espinosa

    (Universitat Pompeu Fabra)

Abstract

We study the effect of apprenticeship programs on firms and welfare, using novel administrative data on the universe Colombian manufacturing firms with at least 10 workers, and a unique reform to apprenticeship regulation. The reform simultaneously establishes apprentice quotas that vary discontinuously in firm size and lowers apprentices' wages. We begin by documenting that the policy is successful in increasing the number of trained apprentices more than threefold. However, the reform also induces significant firm size distortions driven by heterogeneous firm responses. In sectors with high skill requirements, firms avoided hiring apprentices decreasing their size and bunching just below the regulation thresholds. In contrast, firms in low-skilled sectors, increase their size and bunch just above the regulation thresholds in order to be able to hire more apprentices. As a consequence, the regulation results in most apprentices being trained in low-skilled sectors. We develop a simple theoretical model featuring heterogeneous training costs across sectors in order to rationalize and quantify these empirical findings. The key insight of the model is firms that train apprentices incur in an opportunity cost of spending time teaching and not producing. As training in high-skill sectors takes longer than in low-skill sectors, firms in high skilled sectors will avoid apprentices while firms in low-skill sectors try to get as many as possible. Finally, we use the model to analyze the welfare consequences of the regulation and study counterfactual policies.

Suggested Citation

  • Santiago Caicedo & Arthur Seibold & Miguel Espinosa, 2019. "The Effects of Mandating Training in Firms: Theory and Evidence from the Colombian Apprenticeship Program," 2019 Meeting Papers 888, Society for Economic Dynamics.
  • Handle: RePEc:red:sed019:888
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    References listed on IDEAS

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    1. Luis Garicano & Claire Lelarge & John Van Reenen, 2016. "Firm Size Distortions and the Productivity Distribution: Evidence from France," American Economic Review, American Economic Association, vol. 106(11), pages 3439-3479, November.
    2. 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.
    3. Drew Fudenberg & Luis Rayo, 2019. "Training and Effort Dynamics in Apprenticeship," American Economic Review, American Economic Association, vol. 109(11), pages 3780-3812, November.
    4. Carlos Ospino, 2018. "The Effects of Being Subject to the Colombian Apprenticeship Contract on Manufacturing Firm Performance," CEDLAS, Working Papers 0230, CEDLAS, Universidad Nacional de La Plata.
    5. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 539-572, June.
    6. Emmanuel Saez, 2010. "Do Taxpayers Bunch at Kink Points?," American Economic Journal: Economic Policy, American Economic Association, vol. 2(3), pages 180-212, August.
    7. Josef Fersterer & Jörn‐Steffen Pischke & Rudolf Winter‐Ebmer, 2008. "Returns to Apprenticeship Training in Austria: Evidence from Failed Firms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(4), pages 733-753, December.
    8. Kathrin Göggel & Thomas Zwick, 2012. "Heterogeneous Wage Effects of Apprenticeship Training," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(3), pages 756-779, September.
    9. Fersterer, Josef & Winter-Ebmer, Rudolf, 2003. "Are Austrian returns to education falling over time?," Labour Economics, Elsevier, vol. 10(1), pages 73-89, February.
    10. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
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