Firm Commitment Failure in General Skill Provision
RCTReview
In informal labor markets lacking enforceable contracts, enterprise owners cannot credibly commit to providing transferable, general skill training. Consequently, youth refuse to accept wage cuts or pay fees without guarantees of portable skill acquisition.
Picture this
Imagine an auto repair shop owner promising an apprentice that they will learn engine diagnostics, but instead using them solely for manual tire changing. Because the apprentice cannot enforce the promise or verify the curriculum, they refuse to invest time in the apprenticeship unless an independent school oversees the lessons.
What the evidence says
Combining external classroom instruction (180 hours/year) with monitored apprenticeship contracts led to a 48.4 percentage point increase in training participation (p < 0.0001) and a 10.83 month increase in training duration over the control group mean of 2.93 months.
- Who was studied
- N = 731 informal firms and 1,842 youth across 7 urban localities in Côte d'Ivoire.
- How
- Double-sided RCT evaluating training participation under monitored dual training contracts combining classroom and firm instruction.
What to do
Complement informal enterprise apprenticeships with mandated, externally monitored theoretical coursework to guarantee general skill delivery and overcome firm commitment failures.
From the source
"The dual approach can resolve potential commitment failures in firms by ensuring that formal apprentices receive general skill training in vocational centers."
Direct_and_Indirect_Effects_of_Subsidized_Dual_Apprenticeships.pdf