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Why do Firms Train Apprentices? The Net Cost Puzzle Reconsidered

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Author Info
Jens Mohrenweiser () (Institute for Strategy and Business Economics, University of Zurich)
Thomas Zwick (Zentrum für Europäische Wirtschaftsforschung (ZEW) (Centre for European Economic Research))

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Abstract

This paper analyses the impact of replacing unskilled or semi-skilled employees by apprentices on establishment performance. We use representative matched employer–employee panel data and correct for different sources of estimation biases. We show that an increase of the proportion of apprentices in trade, commercial, craft or construction occupations has a positive impact on firm performance. In contrast, companies that increase the share of apprentices in manufacturing occupations face a negative impact on performance, however. These results shed a new light on the popular stylised fact that apprenticeship training always leads to net costs during the apprenticeship period: we argue that firms only hire apprentices at a cost if their skills are relatively specific, their retention rate is high and skilled employees are hard to hire.

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Publisher Info
Paper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Economics of Education Working Paper Series with number 0016.

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Length: 38 pages
Date of creation: Mar 2008
Date of revision: Oct 2008
Handle: RePEc:iso:educat:0016

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Related research
Keywords: apprenticeship training; performance; panel data estimation;

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Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Anke S. Kessler & Christoph Lülfesmann, 2006. "The Theory of Human Capital Revisited: on the Interaction of General and Specific Investments," Economic Journal, Royal Economic Society, vol. 116(514), pages 903-923, October. [Downloadable!] (restricted)
    Other versions:
  2. Acemoglu, Daron & Pischke, Jörn-Steffen, 1996. "Why do Firms Train? Theory and Evidence," CEPR Discussion Papers 1460, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Hilary Steedman, 2001. "Benchmarking Apprenticeship: UK and Continental Europe Compared," CEP Discussion Papers dp0513, Centre for Economic Performance, LSE. [Downloadable!]
  4. Dustmann; Christian & Schönberg, Uta, 2004. "Training and Union Wages," IZA Discussion Papers 1435, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  5. Chang, Chun & Wang, Yijiang, 1996. "Human Capital Investment under Asymmetric Information: The Pigovian Conjecture Revisited," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 505-19, July. [Downloadable!] (restricted)
  6. Acemoglu, Daron & Pischke, Jorn-Steffen, 1999. "Beyond Becker: Training in Imperfect Labour Markets," Economic Journal, Royal Economic Society, vol. 109(453), pages F112-42, February. [Downloadable!] (restricted)
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  7. David Soskice, 1994. "Reconciling Markets and Institutions: The German Apprenticeship System," NBER Chapters, in: Training and the Private Sector, pages 25-60 National Bureau of Economic Research, Inc. [Downloadable!]
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  10. Jens Mohrenweiser & Uschi Backes-Gellner, 2008. "Apprenticeship Training – What for? Investment in Human Capital or Substitute for Cheap Labour?," Economics of Education Working Paper Series 0017, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
  11. Jan Erik Askilden & Oivind Anti Nilsen, 2005. "Apprentices And Young Workers: A Study Of The Norwegian Youth Labour Market," Scottish Journal of Political Economy, Scottish Economic Society, vol. 52(1), pages 1-17, 02. [Downloadable!] (restricted)
  12. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May. [Downloadable!] (restricted)
  13. Katz, Eliakim & Ziderman, Adrian, 1990. "Investment in General Training: The Role of Information and Labour Mobility," Economic Journal, Royal Economic Society, vol. 100(403), pages 1147-58, December. [Downloadable!] (restricted)
  14. Bernd Fitzenberger & Aderonke Osikominu & Robert Völter, 2006. "Imputation Rules to Improve the Education Variable in the IAB Employment Subsample," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 126(3), pages 405-436.
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  15. Zwick, Thomas, 2004. "Employee participation and productivity," Labour Economics, Elsevier, vol. 11(6), pages 715-740, December. [Downloadable!] (restricted)
  16. Lorraine Dearden & Howard Reed & John Van Reenen, 2006. "The Impact of Training on Productivity and Wages: Evidence from British Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(4), pages 397-421, 08. [Downloadable!] (restricted)
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  17. 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. [Downloadable!] (restricted)
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  18. Thomas J. Kane & Dietmar Harhoff, 1997. "Is the German apprenticeship system a panacea for the U.S. labor market?," Journal of Population Economics, Springer, vol. 10(2), pages 171-196. [Downloadable!] (restricted)
    Other versions:
  19. David Roodman, 2006. "How to Do xtabond2," North American Stata Users' Group Meetings 2006 8, Stata Users Group. [Downloadable!]
  20. Stefan C. Wolter & Samuel Mühlemann & Jürg Schweri, 2006. "Why Some Firms Train Apprentices and Many Others Do Not," German Economic Review, Blackwell Publishing, vol. 7, pages 249-264, 08. [Downloadable!] (restricted)
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  21. Paul Ryan & Howard Gospel & Paul Lewis, 2007. "Large Employers and Apprenticeship Training in Britain," British Journal of Industrial Relations, Blackwell Publishers Ltd/London School of Economics, vol. 45(1), pages 127-153, 03. [Downloadable!] (restricted)
  22. Peter Jacobebbinghaus & Jens Mohrenweiser & Thomas Zwick, 2008. "Wie kann die durchschnittliche Ausbildungsquote in Deutschland korrekt gemessen werden?," Economics of Education Working Paper Series 0034, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Spyros Arvanitis & Tobias Stucki, 2008. "Training Propensity of Start-ups in Switzerland - A Study Based on Data for the Start-up Cohort 1996-97," Economics of Education Working Paper Series 0035, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
    Other versions:
  2. Heinz Hollenstein & Tobias Stucki, 2008. "The Impact of ICT Usage, Workplace Organisation and Human Capital on the Provision of Apprenticeship Training : A Firm-level Analysis Based on Swiss Panel Data," Working papers 08-205, KOF Swiss Economic Institute, ETH Zurich. [Downloadable!]
  3. Spyros Arvanitis, 2008. "Are Firm Innovativeness and Firm Age Relevant for the Supply of Vocational Training? A Study Based on Swiss Micro Data," Working papers 08-198, KOF Swiss Economic Institute, ETH Zurich. [Downloadable!]
    Other versions:
  4. Regina Dionisius & Samuel Muehlemann & Harald Pfeifer & Günter Walden & Felix Wenzelmann & Stefan C. Wolter, 2008. "Cost and Benefit of Apprenticeship Training – A Comparison of Germany and Switzerland," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
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