Direct and Indirect Effects of Subsidized Dual Apprenticeships

Original source

Bruno Crépon; Patrick Premand

Discussion paper · IZA Institute of Labor Economics · IZA Discussion Paper 12793 · Version date: November 2019

Permission for School’s use is unestablished.

Used in these cards

Double-Sided Randomization Design

"To simultaneously measure direct effects among individuals and indirect (substitution) effects in firms, we set up a double-sided experiment. Specifically, we randomize whether interested youths were assigned to a formal apprenticeship, and whether apprenticeship positions opened by firms were filled with formal apprentices."

Education-Driven Apprentice Self-Selection

"Compared to traditional apprentices in control firms, formal apprentices are 48 percentage points less likely to have no education, 35 percentage points more likely to have completed primary school, and 13 percentage points more likely to have completed lower secondary school."

Firm Commitment Failure in General Skill Provision

"The dual approach can resolve potential commitment failures in firms by ensuring that formal apprentices receive general skill training in vocational centers."

Firm-Side Substitution Bound

"Substitution effects are also observed: for each formal apprentice placed, 0.23 traditional apprentices is displaced... the net number of new apprenticeship positions created is between 0.74 and 0.77 percent of the number of formal apprentices placed."

Firm Stipend Internalization and Fee Removal

"The firms internalize that the program subsidy covers such costs, so they strongly reduce their contribution. This behavioral response from firms implies in turn that part of the program subsidy is in fact transmitted to firms."

Market Tightness Invariance

"The order of magnitude of the change in the market tightness is $\sigma(\psi-\omega)$, where $\sigma$ is the size of the experiment... The results confirm this feature of the experiment: the tightness adjustment is very small in practice. Control firms and youths are thus unlikely to be affected by spill-overs due to changes in market conditions."

Master Craftsman Supervision Opportunity Cost

"The provision of training also has an opportunity cost for firms, including the opportunity cost of time of mastercraftmen. Finding zero effects on profits is consistent with these effects cancelling each others."

Net Value of Apprentice Work

"Observing a positive impact is highly suggestive that apprentices are paid below their productivity... This increase amounts to 21 380 FCFA per month, more than doubling the net value of work performed by apprentices in control firms."

Routine Task Intensity Reduction

"Youths assigned to formal apprenticeship are more involved in non routine analytical tasks. This is consistent with an improvement in skills and in average productivity."

Skill Signaling via Dual Certification

"Lastly, we also observe a substantial increase in the share of youths receiving training certification, which constitutes a mechanism to signal they have acquired general skills."

Subsidized Dual Apprenticeship

"Four years after the start of the experiment, treated youths perform more complex tasks and their earnings are higher by 15 percent. We conclude that subsidized dual apprenticeships expand access to training, upgrade skills and improve earnings for youths without crowding out traditional apprentices."

Unconditional Quantile Earnings Gain

"The figure shows that the proportion of youths who earn less than a given amount is uniformly and significantly lower in the treatment group than in the control group. This suggests robust positive program impacts on earnings across the distribution."

Opportunity Cost of Vocational Training

"The subsidy contributes to offset these losses in labor earnings, so that the program has no significant impact on youths' total earnings in the short-term."

Windfall Effect on Youth Training Supply

"The share of youths entering formal apprenticeship over the course of the experiment increases by 71.2 percentage points... The difference between the two estimates shows that 18.5 percent of treated youths would have entered traditional apprenticeship in the absence of the intervention, a significant windfall effect."

Within-Occupation Task Intensification

"Importantly, however, there is also a significant increase in the within component of non-routine analytical tasks, showing that treated youths perform more of these tasks even within occupations. This contributes to the decrease in the overall routine task intensity index."