The effect of business cycle expectations on the German apprenticeship market: Estimating the impact of Covid-19

Samuel Muehlemann, Harald Pfeifer and Bernhard Wittek

No 171, Economics of Education Working Paper Series from University of Zurich, Department of Business Administration (IBW)

Abstract: A firm's expectation about the future business climate is an important determinant of the decision to train apprentices, because German firms typically train apprentices to either fill future skilled worker positions, or as a substitute for other types of labor. The current coronavirus crisis will have a strong and negative impact on the German economy according to the current estimates of the business climate in Germany (ifo Business Climate Index). To the extent that the training decision of a firm depends on its perception of the business climate, we expect a downward shift in the firm's demand for apprentices and consequently also a decrease in the equilibrium number of apprenticeship contracts. To assess the impact of changes in business climate expectations, we analyze German data on the apprenticeship market at the state-level and at the occupation-level within states from 2007 to 2019. We apply first-differences regressions to account for unobserved heterogeneity across states and occupations, allowing us to identify the association between changes in the ifo Business Climate Index and subsequent changes in the demand for apprentices, the number of new apprenticeship contracts, unfilled vacancies and unsuccessful applicants. We find that the favorable business climate in Germany in recent years led to a substantial increase in the number of unfilled vacancies. Thus, the apprenticeship market prior to the current crisis can be characterized by excess demand for apprentices (although there are matching problems in some states, with both a high share of unfilled vacancies and a high share of unsuccessful applicants). Taking into account the most recent business climate data up to May 2020, we estimate that the coronavirus-related decrease in firms' expectations about the business climate can be associated with a predicted 9.1% decrease in firm demand for apprentices and a 6.8% decrease in the number of new apprenticeship positions in Germany in 2020 (34,700 apprenticeship contracts; 95% confidence interval: +/- 8,800).

Keywords: Apprenticeship market; Covid-19; coronavirus; business cycle (search for similar items in EconPapers)
JEL-codes: J23 J24 M53 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2020-06
New Economics Papers: this item is included in nep-bec, nep-eur, nep-lma and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Working Paper: The Effect of Business Cycle Expectations on the German Apprenticeship Market: Estimating the Impact of COVID-19 (2020)
Working Paper: The effect of business cycle expectations on the German apprenticeship market: Estimating the impact of Covid-19 (2020)
Working Paper: The effect of business cycle expectations on the German apprenticeship market: Estimating the impact of Covid-19 (2020)
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