Work-Related Ability as Source of Information Advantages of Training Employers

41 Pages Posted: 22 Aug 2015

See all articles by Jens Mohrenweiser

Jens Mohrenweiser

ZEW – Leibniz Centre for European Economic Research

Gabriele Wydra-Somaggio

Independent

Thomas Zwick

University of Würzburg - Business Administration & Economics; Centre for European Economic Research (ZEW); Maastricht University - Research Centre for Education and the Labour Market (ROA)

Date Written: August 2015

Abstract

This paper addresses the puzzle how employers that invest in general human capital can gain an information advantage with respect to the ability of their employees when training is certified by credible external institutions. We apply an established model from the employer-learning literature and distinguish between two ability dimensions: cognitive and work-related ability. We apply this model to the German apprenticeship system and show that cognitive ability certified by external institutions at that the end of apprenticeship training can be signalled to outside employers. Apprenticeship graduates however cannot signal their work-related ability – measured by a small voluntary bonus paid by the training employer – to the outside market. We therefore show that the information advantage on work-related ability explains that training employers can positively select the apprentices they retain. As a consequence, this information advantage induces employers to invest in certified and transferable human capital.

Keywords: training, employer learning, employer change, adverse selection, asymmetric information

JEL Classification: J24, J31, J62, J63, M52, M53

Suggested Citation

Mohrenweiser, Jens and Wydra-Somaggio, Gabriele and Zwick, Thomas, Work-Related Ability as Source of Information Advantages of Training Employers (August 2015). ZEW - Centre for European Economic Research Discussion Paper No. 15-057. Available at SSRN: https://ssrn.com/abstract=2648161 or http://dx.doi.org/10.2139/ssrn.2648161

Jens Mohrenweiser

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Gabriele Wydra-Somaggio

Independent ( email )

No Address Available

Thomas Zwick (Contact Author)

University of Würzburg - Business Administration & Economics ( email )

Sanderring 2
Wuerzburg, D-97070
Germany

Centre for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Maastricht University - Research Centre for Education and the Labour Market (ROA) ( email )

P.O. Box 616
Maastricht, MD6200
Netherlands

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