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General training by firms, apprentice contracts, and public policy

General training by firms, apprentice contracts, and public policy
General training by firms, apprentice contracts, and public policy
Workers will not pay for general on-the-job training if contracts are not enforceable. Firms may if there are mobility frictions. Private information about worker productivities, however, prevents workers who quit receiving their marginal products elsewhere. Their new employers then receive external benefits from their training. In this paper, training firms increase profits by offering apprenticeships which commit firms to high wages for those trainees retained on completion. At these high wages, only good workers are retained. This signals their productivity and reduces the external benefits if they subsequently quit. Regulation of apprenticeship length (a historically important feature) enhances efficiency. Appropriate subsidies enhance it further.
general training, contract enforceability, apprenticeships, regulation
0014-2921
197-227
Malcomson, James M.
ebfa3cb7-df61-4a68-93e3-4f1882f7e9a8
Maw, James W.
9d6c29ff-bbe4-43da-b2bc-576ddb0971ef
McCormick, Barry
6030c745-bb61-4e93-ab8f-91e676281e08
Malcomson, James M.
ebfa3cb7-df61-4a68-93e3-4f1882f7e9a8
Maw, James W.
9d6c29ff-bbe4-43da-b2bc-576ddb0971ef
McCormick, Barry
6030c745-bb61-4e93-ab8f-91e676281e08

Malcomson, James M., Maw, James W. and McCormick, Barry (2003) General training by firms, apprentice contracts, and public policy. European Economic Review, 47 (2), 197-227. (doi:10.1016/S0014-2921(02)00207-6).

Record type: Article

Abstract

Workers will not pay for general on-the-job training if contracts are not enforceable. Firms may if there are mobility frictions. Private information about worker productivities, however, prevents workers who quit receiving their marginal products elsewhere. Their new employers then receive external benefits from their training. In this paper, training firms increase profits by offering apprenticeships which commit firms to high wages for those trainees retained on completion. At these high wages, only good workers are retained. This signals their productivity and reduces the external benefits if they subsequently quit. Regulation of apprenticeship length (a historically important feature) enhances efficiency. Appropriate subsidies enhance it further.

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More information

Published date: 2003
Keywords: general training, contract enforceability, apprenticeships, regulation

Identifiers

Local EPrints ID: 33374
URI: https://eprints.soton.ac.uk/id/eprint/33374
ISSN: 0014-2921
PURE UUID: fb9085f4-94a3-47cf-acaf-097fc18f819d

Catalogue record

Date deposited: 16 May 2006
Last modified: 30 May 2018 16:31

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