Welfare Effects of Penalty Charges to Firms that Do Not Offer Apprenticeship Training Positions
Series
VWA Discussion Papers
Type
discussion paper
Date Issued
2006-07-01
Author(s)
Fleischhauer, Kai-Joseph
Abstract
There is an ongoing discussion in Germany about the implementation of penalty charges if firms refuse to offer apprenticeship training positions to school graduates. Chapter 2 of my PhD thesis aims at analyzing penalty charges in a theoretical model that systematically compares the costs and benefits of this policy instrument. Building on recent training literature, a two-period partial-equilibrium model is developed that allows for worker heterogeneity in ability and covers special features of the German apprenticeship system.
In our model, the implementation of penalty charges faces a trade-off with respect to overall welfare. While penalty charges increase the number of apprenticeship training positions and thus the fraction of trained workers in the workforce, some firms will leave the market to avoid the financial burden, which implies unemployment among workers with low ability. Furthermore, the model suggests that optimal penalty charges increase the overall welfare compared to the laissez-faire equilibrium only if the productivity-enhancement of apprenticeship training exceeds some lower bound.
In our model, the implementation of penalty charges faces a trade-off with respect to overall welfare. While penalty charges increase the number of apprenticeship training positions and thus the fraction of trained workers in the workforce, some firms will leave the market to avoid the financial burden, which implies unemployment among workers with low ability. Furthermore, the model suggests that optimal penalty charges increase the overall welfare compared to the laissez-faire equilibrium only if the productivity-enhancement of apprenticeship training exceeds some lower bound.
Language
English
Keywords
Human Capital Formation
Apprenticeship Training
Inefficient Training Decision of Firms
Penalty Charges
HSG Classification
contribution to scientific community
Refereed
No
Publisher
University of St. Gallen, Department of Economics
Publisher place
St. Gallen
Number
2006-18
Start page
1
End page
41
Pages
41
Subject(s)
Division(s)
Eprints ID
39450