Vocational Education and Training: Institutions and Economic Outcomes

Chiara Benassi
Session Organizers:
Christian Rupietta and Uschi Backes-Gellner
Friday, June 24, 2016: 10:45 AM-12:15 PM
255 Dwinelle (Dwinelle Hall)
Vocational education and training (VET) is becoming more and more popular as remedy against youth unemployment, a consequence of the global economic crisis. Dual VET combines formal education in vocational schools with workplace training in companies and constitutes an important public-private partnership in countries such as Austria, Denmark, Germany, the Netherlands, and Switzerland. Although VET might be a viable remedy against youth unemployment, its other advantages for students and societies—as well as the foundations and maintenance of a VET system—remain poorly understood.

VET has, in addition to its potential to reduce youth unemployment, positive effects on knowledge transfer and innovation. Recent research shows that VET transfers the latest knowledge across all companies participating in VET and thereby has a positive impact on innovation. These findings suggest that VET can improve knowledge diffusion within a region, industry, and/or country, and thereby has the potential to contribute to growth beyond its human capital-related contributions.

To generate beneficial outcomes for companies, regions, industries, and countries, VET requires careful design. VET systems exist in different forms, ranging from strong integration into the national education system (e.g., in Germany and Switzerland) to industry- and region-specific systems (e.g., South Korea, USA). All systems rely on a governance structure that coordinates the cooperative action of companies, professional organizations, and (local) governments. These different designs of VET systems have an influence on firms training motivation and investments and outcomes for a country as a whole, companies and workers. The papers in this session provide analyses for macro and micro level economic outcomes of VET.

The paper in this session contribute to the analysis of institutions in VET and their economic outcomes. The first paper analyses how institutions in VET initiate knowledge diffusion among companies and thereby foster innovation. Therefore it compares the organization of VET in coordinated and liberal market economies, analyses the governance structure of VET and identifies those institutions that initiate knowledge diffusion. A typology of vocational education systems summarises the findings of the country comparisons. The second paper analyses the training motivation in Germany and Australia, two countries that have different institutional frameworks. It compares the two systems of VET and the labour market institutions in both countries and develops hypotheses on the training motivation of companies and then compares direct evidence on employer investments in training. It shows that companies in Germany and Australia differ in their training motivation and their training investments. While companies in Germany regard VET as an investment, VET in Australia is much more production oriented. The third paper analyses training investments of companies on a micro level. It shows for Germany that a company’s investment in training relates to higher post-training wages of apprentices.

Labour Market Institutions and the Training Motivation of Firms: A German - Australian Comparison
Harald Pfeifer, Federal Institute for Vocational Education and Training (BIBB)
Firms' Training Investments and Post - Training Wages of Apprentices
Hans Dietrich, Institute for Employment Research (IAB); Harald Pfeifer, Federal Institute for Vocational Education and Training (BIBB); Felix Wenzelmann, Federal Institute for Vocational Education and Training (BIBB)