Career Progression and Formal Versus On-the-Job Training

42 Pages Posted: 8 Sep 2006

See all articles by Jerome Adda

Jerome Adda

University College London - Department of Economics; Institute for Fiscal Studies (IFS)

Christian Dustmann

University College London; Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR)

Costas Meghir

Yale University; Yale University - Cowles Foundation; Institute for Fiscal Studies (IFS); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Jean-Marc Robin

École Normale Supérieure (ENS) - Laboratoire d'Economie Theorique et Appliquee (LEA); National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST); French National Institute for Agricultural Research (INRA); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

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Date Written: August 2006

Abstract

We develop a dynamic discrete choice model of training choice, employment and wage growth, allowing for job mobility, in a world where wages depend on firm-worker matches, as well as experience and tenure and jobs take time to locate. We estimate this model on a large administrative panel data set which traces labour market transitions, mobility across firms and wages from the end of statutory schooling. We use the model to evaluate the lifecycle return to apprenticeship training and find that on average the costs outweigh the benefits; however for those who choose to train the returns are positive. We then use our model to consider the long-term lifecycle effects of two reforms: One is the introduction of an Earned Income Tax Credit in Germany, and the other is a reform to Unemployment Insurance. In both reforms we find very significant impacts of the policy on training choices and on the value of realised matches, demonstrating the importance of considering such longer term implications.

Keywords: educational decision, apprenticeship, dynamic choice, evaluation

JEL Classification: I2, J6

Suggested Citation

Adda, Jerome and Dustmann, Christian and Meghir, Costas and Robin, Jean-Marc, Career Progression and Formal Versus On-the-Job Training (August 2006). IZA Discussion Paper No. 2260, Available at SSRN: https://ssrn.com/abstract=928804

Jerome Adda

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom

Institute for Fiscal Studies (IFS)

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

Christian Dustmann (Contact Author)

University College London ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom
+44 20 7679 5832 (Phone)
+44 20 7916 2775 (Fax)

Institute for Fiscal Studies (IFS)

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Costas Meghir

Yale University ( email )

37 Hillhouse avenue
New Haven, CT CT 06511
United States
+12034323558 (Phone)

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Jean-Marc Robin

École Normale Supérieure (ENS) - Laboratoire d'Economie Theorique et Appliquee (LEA) ( email )

48 boulevard Jourdan
75014 Paris
France
+33 1 4313 6365 (Phone)
+33 1 4313 6362 (Fax)

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

15 Boulevard Gabriel Peri
15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

French National Institute for Agricultural Research (INRA)

147, rue de l'Universite
Paris Cedex 07, 78-Yvelines 75338
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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