Supply Shocks in the Market for Apprenticeship Training. (February 2022)

• Record Type: Journal Article
• Authors: Muehlemann, Samuel; Dietrich, Hans; Pfann, Gerard; Pfeifer, Harald
• Is Part Of: Economics of education review. Volume 86(2022)
• Publication Date: 2022-02
• Subjects: Apprenticeship market -- Labor supply shock -- School reform -- Wage rigidity; Education -- Economic aspects -- Periodicals; 370
• DOI: 10.1016/j.econedurev.2021.102197
• Languages: English
• ISSNs: 0272-7757

Abstract

Highlights: Positive supply shock increases the number of new apprenticeship contracts Wage rigidity in the German apprenticeship market No evidence for substitution effects by the education level of apprentices Abstract: We present a model with heterogeneous inputs and constant elasticity of substitution to examine the possible effects of a supply shock in the market for apprenticeship training. The model's predictions are tested using data from a German high school reform that led to a one-time increase in the supply of highly educated apprentices. A difference-in-differences estimation strategy exploits regional variation in the timing of implementation, and an instrumental variable approach identifies the supply shock effects. We find that apprenticeship contracts among individuals with a high school degree increased by 7%, while apprentice wages were unaffected by the supply shock. Moreover, we find no evidence of substitution effects, as the number of training contracts among individuals with a lower-level school degree did not decrease. Our model predicts that such effects may occur when wages are sticky for apprentices with a high level of education relative to their productivity, which signals inefficiencies in the market for apprenticeship training.