Citation

Discussion Paper Details

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Title: Should Firms be Required to Pay for Vocational Training?

Author(s): Margaret Stevens

Publication Date: March 1999

Keyword(s): Credit Constraints, human capital investment, labour market frictions, Uncertainty and vocational training

Programme Area(s): Labour Economics

Abstract: Failure in the training market may result from credit constraints and the inability to insure against labour income uncertainty, deterring potential trainees, or labour market imperfections that create external benefits for firms. This paper constructs a model of a training market affected by both problems, and examines the rationale for training levy schemes, intended to make firms increase investment in vocational training. It is shown that regulating firms, or equivalently financing a subsidy by taxation of profits, can achieve a Pareto improvement irrespective of the cause of under-investment. However, when the levy is assessed as a proportion of wages the effect is to address capital market imperfections only.

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Bibliographic Reference

Stevens, M. 1999. 'Should Firms be Required to Pay for Vocational Training?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2099