Apprenticeship Training and Commitment to Training Provision

Christian Dustmann and Uta Schönberg ()
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Uta Schönberg: Department of Economics, University of Rochester
Authors registered in the RePEc Author Service: Uta Schoenberg

No 32, Economics of Education Working Paper Series from University of Zurich, Institute for Strategy and Business Economics (ISU)

Abstract: 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.

Keywords: educational policies; training; wage compression (search for similar items in EconPapers)
JEL-codes: I2 M53 J24 J31 (search for similar items in EconPapers)
Date: 2007-07
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Persistent link: http://EconPapers.repec.org/RePEc:iso:educat:0032

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