New evidence on the complementarity of education and training. Regina T. Riphahn. and. Parvati Trübswetter. 21 March 2007

Transcription

1 New evidence on the complementrity of eduction nd trining Regin T. Riphhn nd Prvti Trübswetter 21 Mrch 2007 We compre the incidence of trining nd the chnge in the ge grdient of trining for high nd low skilled Germn workers between 1996 nd Not only do highly skilled workers receive more trining thn lower skilled workers t ny point in time, lso the increse in the provision of trining disproportiontely benefited those with high skills. Thus eduction nd trining pper to be complements nd the gp in lbor mrket performnce between skill groups widens over time. The shre of trining provided to older workers, prticulrly high skilled older workers, incresed substntilly. This my reflect response of employers to the fct tht workers re now work until they rech higher ges, which increses returns to humn cpitl investments. JEL Clssifiction: J24, J10, M53 Keywords: trining nd eduction, complementrity, substitutbility, humn cpitl investment, popultion ging, demogrphic chnge Correspondence to: Regin T. Riphhn Univ. of Erlngen-Nuremberg Lnge Gsse 20 D Nuremberg Germny Phone: Fx: Emil: Regin.Riphhn@wiso.uni-erlngen.de We cknowledge the finncil support of the RtSWD / BMBF Germny s well s the Frisch Stiftung t the University of Erlngen-Nuremberg. We thnk Jennifer Hunt nd seminr prticipnts t MPI-Rostock for helpful comments. 0

2 1. Introduction The question of whether forml eduction nd workplce trining re complements or substitutes hs recently sprked new debtes nd reserch (e.g. Arig nd Brunello 2006, vn Smoorenburg nd vn der Velden 2000). The OECD emphsized the relevnce of this issue sying tht " differences in the ssocition of prior humn cpitl investments nd trining could lso hve importnt implictions for equity " (OECD 1999, p.149). If only the highly educted received dditionl trining, lbor mrket differences by forml eduction would be reinforced. On the other hnd if workplce trining were substitute for forml eduction existing differences in lbor mrket performnce nd productivity could be meliorted. In this study we investigte the reltionship between forml eduction nd workplce trining over time. Due to number of institutionl chnges in Germny similr to other Europen countries - workers hve strted to sty in the workforce longer. In West Germny, for exmple, the verge retirement ge rose by bout 2 yers between 1980 nd 2005 (DRV 2006). When workers sty ctive longer, the expected returns to workplce trining increse. We first show tht indeed the incidence of workplce trining hs incresed over time nd prticulrly so mong older employees. Then we turn to our min question nd investigte whether this increse in the trining incidence hs ffected high nd low skilled workers eqully. If prticulrly the highly skilled workers hve received dditionl trining nd dditionl trining is complement to eduction, the equity problem pointed out by the OECD intensified. If low skilled workers hve benefited more from humn cpitl investments nd trining is provided s substitute to forml eduction, the lbor mrket disdvntges of the lest educted workers re reduced by the recent developments. 1

3 This dynmic perspective is new to literture tht typiclly investigtes the correltion between forml eduction nd trining t just one point in time. In n erly study Lynch nd Blck (1998) use dt on employers in the United Sttes in 1994 to investigte both the employer- nd employee-relted ptterns of employer-provided trining. They conclude tht trining complements forml eduction nd tht there is 'virtuous circle' for those who obtined schooling erly on. 1 In their 2005 survey pper Bssnini et l. use dt of the Europen Community Household Pnel nd confirm tht eduction nd trining re positively correlted. The sme conclusion is drwn by Blundell et l. (1999) in their review of the returns to the 'three min components of humn cpitl', i.e. bility, forml eduction, nd on the job trining. Two other empiricl investigtions of the issue obtin less cler-cut results. Vn Smoorenburg nd vn der Velden (2000) study the trining experience of Dutch smple of school levers. They confirm tht the more educted hve higher probbility of receiving firm trining. But they lso show tht the overeducted receive less trining while the undereducted do not receive more trining s would hve been suggested by mtching theory rgument, ccording to which trining bridges the differences between vilble nd required skills. For some eductionl degrees nd some types of employment the uthors find substitutbility nd for others complementrity between eduction nd trining. Most recently Arig nd Brunello (2006) pplied employee dt from Thilnd to study the reltionship between eduction nd trining. The uthors found both, significnt substitutbility s well s complementrity between forml eduction nd trining, here depending on the type of employer-provided trining considered. The issue remins unsettled. The ssumption tht forml eduction nd trining re complements is plusible, if employers' returns to trining the well educted exceed the 1 Bellmnn nd Düll (1999) obtin similr results with Germn estblishment dt. 2

4 returns to trining lesser trined workers. This could be the cse if the ltter hve better lerning skills nd lower mrginl trining costs thn those with less eduction. Also, the highly educted might be ble to extend their ctive life by more thn employees who my hve dmged their helth in working life of predominntly mnul lbor. On the other hnd there re good rguments for the substitutbility of eduction nd trining: Groot et l. (1994) found tht the better educted demnd more compenstion to prticipte in trining nd Sichermn (1991) shows empiriclly tht employers invest less in overeducted workers becuse these re more likely to quit nd to move to more suitble jobs. Using dt from the Germn Mikrozensus we describe the chnge in the incidence of trining seprtely for high nd low skilled workers. In first step we pply two different decomposition procedures to determine whether the increse in workplce trining reltes to chnges in worker chrcteristics or e.g. to chnges in gespecific trining probbilities. Then we study skill group-specific trends in the provision of trining in multivrite regressions. We find tht high skill workers receive more trining thn low skill workers, which suggests cler complementrity reltionship of trining nd eduction in Germny. Also, the incidence of trining hs incresed substntilly over time, nd the reltive provision of trining to older workers incresed more for high thn for low skill workers. Chnges in the trining incidence re neither due to chnges in the popultion ge structure nor to other shifts in the chrcteristics of workers nd their jobs. Insted chnges in behvior possibly in response to higher returns for longer working employees - re the most likely cndidte to explin the observed developments. 3

5 2. Dt nd Descriptive Evidence The Germn Mikrozensus surveys the residents of one percent of ll Germn dwellings. The dtset provides lrge nnul smples of over 800,000 individul observtions. As since 1996 only rndom 45 percent of the full smple ws sked bout trining we use only these observtions. 2 Our smple considers full-time workers, ged who hve been employed over the course of the lst clendr yer. Excluded re pprentices, militry personnel, fmily helpers, nd the self-employed. Becuse our results would be sensitive to systemtic shift in lbor force prticiption over the period of our nlysis we show in Figure 1 tht our smple of employees s frction of the relevnt Mikrozensus popultion did not chnge in either systemticlly ge-relted wy. 3 We pply n indictor of voctionl qulifiction to ctegorize workers s high or low skilled employees: those with tertiry (polytechnic nd university) nd dvnced voctionl degrees (e.g. mster of crfts or technicin) re defined s high skilled, those with less voctionl trining re considered s low skilled. Bsed on this definition bout one in three individuls is high skilled. It is importnt to note tht the wording of the question on trining prticiption hs chnged between surveys (see Appendix). The first prt of our nlysis compres the trining propensity for the yers 1996 nd 2004, when individuls were sked bout their prticiption in trining for professionl purposes over the course of the lst yer. After omitting observtions with missing vlues e.g. on voctionl qulifiction our smple contins 49,768 nd 45,860 observtions for 1996 nd 2004 respectively. 4 2 Up until 1990 everybody ws sked, from 1991 through 1995 the question ws nswered on voluntry bsis, nd since 1996 only 45 percent of the smple is required to nswer the question. 3 We inspected the grph in Figure 1 by sex nd did not find vst shifts in lbor force prticiption either. 4 The questionnire explicitly sttes tht the informtion on voctionl qulifiction is provided on voluntry bsis for individuls ge 51 nd bove. However, the shre of missing vlues on the voctionl degree does not increse vstly for the older ge groups compred to the younger ones. An nlysis of the chrcteristics of those who do not provide the informtion yields tht these individuls re more likely to be non-germn nd blue collr workers thn those who provided the informtion on voctionl trining. 4

6 Figure 2() describes the incidence of trining by ge nd skill group in 1996 nd Over time the propensity to prticipte in continuing eduction incresed for both groups, which, however, my in prt be due to the chnged wording of the question. Low skill employees hve decidedly lower trining incidence. Trining becomes less common with ge for both skill groups in both yers. Figure 2(b) describes the chnge in the trining incidence by skill group over time. 5 For both skill groups prticulrly ge groups bove ge 45 experienced increses in trining probbilities over time, flttening the ge profile of trining provision Algebric Decomposition of Chnges in Trining We decompose the totl chnge in the observed probbility of trining between 1996 nd 2004, seprtely for the full smple nd for the high nd low skill subsmples. The overll probbility of trining t time t, P t (tr), cn be described s the weighted sum of gespecific trining probbilities: t 65 ( tr) = [ P ( tr Age ) P ( Age )] P (1) = 25 t t To see how the chnge in observed trining propensities between 1996 nd 2004 cn be decomposed into chnges in the ge-specific trining propensities nd the popultion ge distribution, consider the following decomposition: 5 To clculte these differences we first normlized the observed vlues for All ge group-specific probbilities were djusted by the constnt rtio of the 1996 probbility of trining cross ll ge groups reltive to the sme 2004 probbility. The rtio mounts to 0.15 / 0.30 for high skill workers nd to 0.06 / 0.11 for low skill workers. 6 These ptterns re similr for both sexes when considered seprtely. 5

7 ΔP ( tr) = P04( tr) P96( tr) = [ P ( tr Age ) P ( Age )] P ( tr Age ) P ( Age ) = = = = = = [ ] 65 [ P ( tr Age ) P ( tr Age )] P ( Age ) P ( tr Age )[ P ( Age ) P ( Age )] [ Δ P( tr Age ) P ( Age )] + [ Δ P( Age ) P ( tr Age )] shift effect = 25 = = ge structure effect (2) We lbel the first prt of this expression the "shift effect" becuse it reflects the shre of the totl chnge, ÎP(tr), tht is independent of chnges in the popultion ge structure nd due only to shifts in ge-specific trining probbilities. In contrst, the second prt lbeled "ge structure effect" mesures the prt of the totl chnge, ÎP(tr), tht is due to chnges in the popultion ge structure nd independent of behviorl chnges. Next, we cn decompose the "shift effect" further, to describe chnges in trining probbilities for specific ge groups: shift = = ΔP = ΔP [ ΔP( tr Age ) P04 ( Age )] ( tr Age ) + ΔP( tr Age ) ΔP( tr Age ) ( tr Age ) + δ {[ ] P ( Age )} 04 (3) 1 65 where Δ ( tr Age ) = [ ΔP ( tr )] P Age describes the "Averge Shift" of ge = 25 specific trining probbilities over time. It would lso cpture the effects of chnges in the wording of the survey question over time. The second term of the eqution, 3*, sums the weighted "specific ge effects", *. If the trining propensities hd chnged in exctly the sme mnner for ll ge yers, then ll specific ge effects, *, would be zero. If, however, prticulrly older workers receive more trining thn before, we would expect lrger "specific ge effects" * for these older ge groups thn for others. The results re summrized in Tble 1 for the two subsmples nd the full smple. While the chnges in the trining incidence re different for the two subsmples with n increse of lmost 15 percentge points for the high skilled nd only bout 5 percentge 6

8 points for the low skilled workers, the decompositions for the two subsmples s well s for the full smple yield very similr ptterns: the increse in the trining incidence results predominntly from shift effect. The ge structure effect is negtive, which indictes tht popultion ging per se would hve reduced the overll trining probbility over time. The vst shift effects reflect considerble chnges in ge-specific trining probbilities. Applying the decomposition of eqution (3) we find tht in ll three cses most of this chnge is due to n overll increse in ge-specific trining probbilities: the verge shift lone explins just bout the entire observed chnge, while the sum of the specific ge effects is smll. However, these sums hide substntil differences cross ge groups which re depicted in Figure 3 for the two subsmples of high nd low skilled workers. We see tht the ge-specific chnges re generlly lrger for the high skill groups. Also, the figure shows increses in the ge-specific trining incidence for the ge groups 40 through 54 mong low skill workers nd for the ge group 45 through 59 for high skill workers. This is the development we would expect if the extension of the work life provided n incentive for employers to invest more nd longer in the trining of the work force. 4. Regression-Bsed Decomposition After finding tht most of the increse in trining probbilities ws due to n overll increse in ge-specific trining probbilities, we now pply different pproch to study the determinnts of chnges in trining. Insted of differentiting only the effects of the popultion ge structure from generl behviorl chnges we now look t the chnges of ll potentil determinnts of trining. In the spirit of Oxc-Blinder decompositions we seprtely evlute the effects of chnges in the vlues of trining determinnts nd of chnges in these determinnts' ssocition with the incidence of trining. 7

9 Agin, the nlysis is performed seprtely for the high nd low skill subsmples nd for the full smple. The first two columns of Tble 2 present descriptive sttistics on those individul nd employment chrcteristics of the full smple in 1996 nd 2004, which re typiclly considered s determinnts of receiving trining. A comprison of the covrite mens for the two yers indictes tht the chrcteristics of the smple hve chnged only somewht over time: on verge, workers ged, the shre of blue collr workers declined, tht of white collr workers incresed, nd the frction of high skill workers incresed slightly over time. The lst two columns of Tble 2 provide the mrginl effects of probit estimtions of the determinnts of individul trining by skill in Prticulrly with respect to the mrginl effects of individul chrcteristics we observe substntil differences in the determinnts of trining cross skill groups. The estimtes of the qudrtic ge effect imply tht trining flls with ge for low skill workers bove ge 17 nd for high skill workers bove ge 35. Among the more interesting results is the finding tht femles receive significntly less trining mong low skilled workers but suffer no disdvntge in our high skill smple. To the contrry, non-germns re disdvntged significntly in the high skill group but not mong low skill workers. In both smples, civil servnts hve the highest incidence of receiving trining. The pseudo R 2 vlue of both regressions is reltively low t 7.4 nd 4.5 percent for low nd high skill workers, respectively: only smll frction of the overll chnges in the trining probbility is subject to the systemtic impct of the considered determinnts. As second step we now pply version of the Oxc-Blinder decomposition to quntify the reltive impct of chnges in the explntory vribles nd of chnges in their effects for the overll development of trining propensities over time. We pply the 7 The results for 1996 nd the overll regression results re not presented to sve spce but re vilble upon request. 8

10 procedure developed by Firlie (1999, 2005) to trnslte the Oxc-Blinder decomposition for sitution with bivrite dependent vrible. The effects of chnges in prmeters (") nd covrites (X) cn be distinguished using eqution (4): {, } + { P( α, X ) P( α X )} ( tr) = P( α X ) P( α, X ) ΔP = prmeter effect + chrcteristics effect 04, (4) ( ) P α 04, X 04 represents the verge predicted probbility of receiving trining, where every worker's chrcteristics (X) re s observed in 2004 nd the prmeters (") of the probit estimtion for 2004 re pplied. The first term in eqution (4) ("prmeter effect") considers the differentil in verge trining probbilities tht results when the 2004 chrcteristics re used with both the 2004 nd the 1996 prmeter vector. We focus on the second term, the "chrcteristics effect." It evlutes the difference in predicted trining probbilities when the individul chrcteristics of different yers re pplied to prmeter vector " tht is held constnt, e.g. t the 1996 level. This second term indictes the extent to which the chnge in trining probbilities over time cn be ttributed to chnges in worker chrcteristics. Insted of using the prmeter vector s of 1996, s in eqution (4), the chrcteristics effect cn be evluted t the 2004 set of prmeters ", or t the prmeters from pooled estimtion, which is wht we use below. An dditionl interesting option within this frmework of nlysis is to decompose the "chrcteristics effect" further nd to mesure the extent to which certin groups of covrites explin the totl "chrcteristics effect." To mesure the effect of the group of covrites X k we evlute P α k X k + α k X k P α k X k + α k X k. (5) Agin, this expression cn be evluted either using the coefficient estimtes for 1996 (s in eqution (5)), for 2004, or for the pooled smple. Ech group of covrites k cn be 9

11 evluted seprtely nd their individul contributions dd up to the totl "chrcteristics effect" s in eqution (4). The distinguishing feture of the Firlie pproch is tht it clcultes the verge of individul predictions insted of predicting t verge covrite vlues, which is usully done (see e.g. Shields 1999). 8 The problem of mtching observtions on X k from different yers is solved using procedure kin to propensity score mtching (c.f. Firlie 2005). The stndrd errors re clculted using the delt method. 9 The results of our nlysis re summrized in Tble 3. Agin, we strt with rw differences in trining probbilities of 14.7, 5.1 nd 8.4 percentge points for the high skill, low skill, nd full smple between 1996 nd When we use the prmeter estimtes of the pooled regression no more thn bout 2 percent of the rw differences for high nd low skill workers cn be explined by chnges in chrcteristics over time. 10 When we investigte the min determinnts of the smll effect of covrite chnges we obtin the results presented in the bottom prt of Tble 3: the smple ge chnged lot over time, however, it would hve cused decline in probbilities rther thn the observed increse. Insted, just bout ll the other significnt effects help explin the increse in trining probbilities. Among low skill workers the other lrge effects derive from the chnge in the workforce's mritl sttus nd region of residence over time, mong high skill workers the lrgest effects besides those of ge derive from shifts between blue nd white collr workers over time. Overll, however, we cn explin only smll portion of the chnges in trining probbilities bsed on worker chrcteristics. This leves more thn 95 percent of the difference to be explined by either chnges in 8 In logit model with constnt term the verge of the predicted vlues exctly mtches the smple verge, i.e. eqution (4) holds exctly. This is neither the cse for the probit estimtor nor in the stndrd cse where the predicted vlues re clculted bsed on verge covrite vlues. 9 We pply the Stt9 lgorithm "firlie" provided by Jnn (2006). 10 We lso clculted the decomposition effects when using the 1996 nd 2004 coefficients s bse vlues. However, most likely due to the smll explntory power of the chnges in chrcteristics we obtined implusible results. 10

12 employee nd employer behviors, by chnges in survey design, or by other "unexplined" fctors. 5. Multivrite Anlysis of the Chnge in Trining Probbilities over Time In this section we tke closer look t the dynmics of the chnge in trining probbilities. We explin the probbility of individul trining pplying probit model to pooled nnul dt for the yers from 1996 to In order to cpture the overll nd ge groupspecific developments in trining probbilities by skill group nd to model the dynmics of trining probbilities for the different ge groups we interct liner time trend with ge group indictors. As the design of the questionnire chnged over the yers, we use individul yer dummies insted of liner time trend to control for the min time effect. This llows to flexibly ccount for chnges in nswering behvior nd to cpture nnul developments in trining probbilities. 11 The estimtion results for the key indictors of trining prticiption re presented in Tble 4 for both skill subsmples nd for the full smple. The mrginl effects on the interction terms re sttisticlly significntly different from zero nd yield cler pttern of incresing trining prticiption over time for ll ge groups. A comprison of the mrginl effects for low nd high skill employees yields gin much lrger effects for the ltter: most of the mrginl effects re t lest twice s lrge for high compred to low skill employees. This suggests tht the expnsion of trining disproportiontely benefited those with better eduction nd tht trining ws provided s complement to forml eduction. To illustrte these developments we clculted the predicted probbility of trining for mrried, Germn, mle reference person, who works in Berlin, in firm with more 11 As our dt is designed s repeted cross section, we cnnot pply pnel estimtors. However, following Verbeek (2005), probit model with repeted cross sections cn be estimted ssuming tht ny unobserved individul effects plus the rndom error term follow stndrd norml distribution. 11

13 thn 50 employees in mnufcturing, seprtely for ech ge nd skill group. Tble 5 presents the chnge in the predicted probbility of trining for this person between 1996 nd 2004 by ge nd skill group bsed on seprte regressions for the two subsmples nd the full smple. As ll entries re positive we conclude tht the probbility of trining incresed in ech ge nd skill group in the considered period. Since the entries increse lmost linerly with ge it ppers tht the oldest workers benefited most from the expnsion of trining over time nd more so mong the high thn mong the low skill employees. The probbility of trining tripled mong high skill workers bove ge 45. Wheres Tble 5 focuses on comprison between the yers 1996 nd 2004, Figure 4 utilizes the results of the pooled probit regressions to present the development of trining probbilities on n nnul bsis. It depicts the rtio of the predicted trining probbility for those ged reltive to the probbility predicted for those in ge group In 1996 the probbility of trining of those ged reched on verge bout 15 percent of the trining probbility of the young. This probbility chnged over time to bout 35 percent by Therefore, even if the level of trining for older workers is much lower thn tht for younger workers t ll times, we see chnge. Also here, the ge rtio for high skill workers is bove tht for low skill workers nd incresed fster. Thus, mong the high skilled older workers lwys hd higher chnce of receiving trining reltive to the young nd these chnces grew fster thn mong low skill workers. The rising trining propensity for older workers over time my reflect tht firms incresingly employ older workers nd prticulrly those with high skills for longer work-life Note tht by clculting the rtio of predicted probbilities t every point in time the shift in the rtio of predictions over time s depicted in Figure 3 is unffected by ny mesurement problems possibly induced by chnges in the survey instrument. 12

14 6. Conclusions This study uses Germn Mikrozensus dt of the lst decde ( ) on high nd low skill workers in order to nswer the question whether eduction nd trining re complements or substitutes. Overll, the incidence of trining incresed while t the sme time the expected durtion of employees' work lives incresed. This mtches closely the conclusions of Bssnini et l. (2005) who point out tht the ge grdient in the trining incidence flls s the employment rte of older workers increses. The uthors cnnot distinguish whether this is driven by employbility or incentive issues. We pply decomposition nlysis in order to determine the reltive importnce of popultion ging in this development: popultion ging would hve reduced the trining incidence, while we see in fct n overll increse. Most of this overll increse flls eqully on ll popultion ge groups, even though workers bove ge 45 pper to benefit more thn their younger collegues. In regression-bsed decomposition we find tht neither popultion ging nor other shifts in the chrcteristics of workers contribute substntilly to explin the observed chnges. More thn 90 percent of the increse in the trining incidence remins to be explined by other fctors, such s chnges in the behvior of employers nd employees. Using regressions on pooled nnul dt we find tht the positive trend in the trining incidence lsted over the entire considered period, nd covered ll ge nd skill groups. The probbility of trining for older compred to younger workers incresed substntilly. The incidence of trining differs vstly by the skill level of workers. Alredy in 1996 high skill workers re twice s likely to report trining compred to low skill workers. The increse in trining provision over time did not chnge this pttern. The distribution of trining cross ge groups shifted somewht from the young to the old for 13

15 ll skill groups over time. The increse in the incidence of trining gin nd disproportiontely benefited the group of skilled workers. Across ll ge groups high skill workers experienced lrger increses in the trining propensity thn low skill workers. This suggests tht the complementrity reltionship between eduction nd trining intensified over time nd tht the group of lower skill workers fell even further behind with respect to their stock of humn cpitl nd ernings potentil in the lbor mrket. Apprently, trining is not provided in mnner tht blnces the existing lbor mrket problems of low skill workers. This is fct ny ctive lbor mrket policy promoting trining for older workers should be wre of. 14

16 References Arig, Kenn nd Giorigo Brunello, 2006, Are eduction nd trining lwys complements? Evidence from Thilnd, Industril nd Lbor Reltions Review 59(4), Bssnini, Andre, Alison Booth, Giorgio Brunello, Mri de Pol, nd Edwin Leuven, 2005, Workplce Trining in Europe, IZA Discussion Pper No. 1640, Bonn / Germny. Bellmnn, Lutz nd Herbert Düll, 1999, Die Bedeutung des beruflichen Bildungsbschlusses in der betrieblichen Weiterbildung Eine Anlyse uf der Bsis des IAB Betriebspnels 1997 für West- und Ostdeutschlnd, in: Bellmnn Lutz nd Viktor Steiner (eds.) Pnelnlysen zur Lohnstruktur, Qulifiktion und Beschäftigungsdynmik, Nürnberg, Blundell, Richrd, Lorrine Derden, Costs Meghir, nd Brbr Sinesi, 1999, Humn Cpitl Investment: The Returns from Eduction nd Trining to the Individul, the Firm, nd the Economy, Fiscl Studies 20(1), DRV (Deutsche Rentenversicherung), 2006, Deutsche Rentenversicherung in Zhlen 2006, downlod t /de/inhlt/04 Formulre Publiktionen/03 publiktionen/sttistiken/broschueren/rv i n zhlen pdf,property=publictionfile.pdf/rv_in_zhlen_pdf Firlie, Robert W., 1999, The Absence of the Africn-Americn Owned Business: An Anlysis of the Dynmics of Self-Employment, Journl of Lbor Economics 17(1), Firlie, Robert W., 2005, An Extension of the Blinder-Oxc Decomposition Technique to Logit nd Probit Models, Journl of Economic nd Socil Mesurement 30(4), Groot, Wim, Joop Hrtog, Hessel Oosterbeek, 1994, Costs nd Revenues of Investment in Enterprise Relted Schooling, Oxford Economic Ppers 46(4), Jnn, Ben, 2006, firlie Nonliner decomposition of binry outcome differentils, softwre module vilble with Stt 9 (downloded August 3, 2006). Lynch, Lis M. nd Sndr E. Blck, 1998, Beyond the incidence of employer-provided trining, Industril nd Lbor Reltions Review 52(1), OECD, 1999, Employment Outlook, Pris. Shields, Michel, 1998, Chnges in the Determinnts of Employer-Funded Trining for Full-Time Employees in Britin, , Oxford Bulletin of Economics nd Sttistics 60(2), Sichermn, Nchum, 1991, 'Overeduction' in the Lbor Mrket, Journl of Lbor Economics 9(2), , Vn Smoorenberg, M.S.M nd R.K.W. vn der Velden, 2000, The trining of school-levers. Complementrity or substitution?, Economics of Eduction Review 19(2), Verbeek, Mrno, 2005, Pseudo pnels nd repeted cross-sections, mimeo. 15

17 Figure 1 Popultion shre of our smple over time.5.4 prt Age group Lbour mrket prt. 96 lbour mrket prt. 104 Source: Own clcultions bsed on Germn Mikrozensus 1996 nd

18 Figure 2 Trining Incidence by Age Group, Skill Group, nd Yer () Levels of Trining Incidence by Age Group, Skill Group, nd Yer.4.3 P(Tr) Age group yer 1996 low skill yer 2004 low skill yer 1996 high skill yer 2004 high skill (b) Chnges in the Trining Incidence over Time by Age nd Skill Group P(Tr) Age group dp(tr) low skill dp(tr) high skill Note: Figure 1(b) provides the difference of the normlized trining incidence in 2004 nd the observed trining incidence in The 2004 dt were normlized to ccount for the overll increse in the trining incidence tht might be due to chnges in the questionnire. The normliztion ws performed by dividing ll observed ge groupspecific trining probbilities of 2004 by the sme rtio of the overll verge trining probbility for 1996 over tht of 2004, for high skill workers 0.15 / 0.30 nd for low skill workers 0.07 / Source: Own clcultions bsed on Germn Mikrozensus 1996 nd

19 Figure 3 Age-specific Chnge in the Conditionl Trining Probbility (*) 0,004 0,003 0,002 Delt 0, , ,002-0,003 Low Skill High Skill Source: Own clcultions bsed on Germn Mikrozensus 1996 nd Figure 4 Reltive Predicted Trining Probbility of Older Workers (60-65) Compred to Younger Workers (25-30) (in percent) 50,00 45,00 40,00 35,00 30,00 25,00 20,00 15,00 10,00 5,00 0, Yer low skill high skill ll Source: Own clcultions bsed on Germn Mikrozensus 1996 to

20 Tble 1 Results of the Algebric Decomposition of Chnges in Trining Incidence Totl Shift Effect Age-Structure Chnge Totl = Averge Shift + Sum of Specific Age Effects Effect High Skill Low Skill Full Smple Source: Own clcultions bsed on Germn Mikrozensus 1996 nd

21 Tble 2 Dt Description nd Probit Mrginl Effects for the Probbility of Reporting Trining for the High nd Low Skill Smples for the 1996 Men Men ME ME (Std. dev.) (Std. dev.) Probit Probit Full Smple Full Smple Low Skilled High Skilled High skilled !! Low skilled !! Age 41,316 42, ** (10.079) (9.638) (0.49) (4.32) Age squred / ,086 19, ** ** (8.572) (8.372) (2.62) (5.55) Sex (mle=1) 0,674 0, ** (8.97) (0.30) Mritl sttus (mrried=1) 0,686 0, ** * (4.68) (2.15) Ntionlity (Germn=1) 0,950 0, ** 0.095** (4.35) (4.16) Civil servnt 0,090 0,085 ref. ref. White collr worker 0,516 0, * ** (2.50) (5.62) Blue collr worker 0,394 0, ** ** (11.80) (12.05) Firmsize 1-10 workers 0,125 0,128 ref. ref. Firmsize workers 0,096 0, (0.48) (0.21) Firmsize workers 0,139 0, (0.78) (1.31) Firmsize t lest 50 workers 0,634 0, ** (4.65) (1.41) Firmsize unknown 0,007 0, (0.63) (0.48) Observtions 49,768 45,860 31,564 14,296 Pseudo R-squred!! Notes: The columns entitled M.E. represent mrginl effects nd bsolute vlues of z- sttistic in prentheses. ** nd * indicte sttisticl significnce t the 1 nd 5 percent level. Not presented re the mrginl effects for 15 federl sttes nd 10 industries. The descriptive sttistics by skill groups s well s estimtions for 1996 re not presented to sve spce. 20

22 Tble 3 Results of Regression Decomposition: Effect of Chnged Chrcteristics High Skill Low Skill Percentge point difference to be explined: Shre of totl difference explined: 2.36 % 2.42 % Explined effect due to: Age -147,8% ** -499,6% ** Sex 2,1% 115,0% ** Mritl Sttus 98,2% ** 111,5% ** Ntionlity -6,4% ** 13,0% ** Region of Residence 93,7% ** 140,9% ** Blue / White Collr / Civil Servnt 9,0% 220,4% ** Firmsize 6,1% -18,5% ** Industry 44,9% ** 17,6% * Note: ** nd * indicte sttisticl significnce t the 1 nd 5 percent level. The stndrd errors were obtined using the delt method. 21

23 Tble 4 Probit Coefficient Estimtes nd Mrginl Effects of the Probbility of Trining (Pooled Dt 1996 to 2004) M.E. M.E. (z-sttistic) (z-sttistic) low skill high skill Time indictors, omitted: (0.17) (1.74) ** (0.69) (16.40) ** ** (13.64) (16.23) ** ** (12.30) (15.12) ** ** (11.61) (13.46) ** ** (11.74) (13.33) ** 0.069** (11.24) (7.87) ** 0.071** (9.71) (7.17) Age group dummies, omitted: ** * (3.66) (2.30) ** ** (7.73) (6.74) ** ** (10.81) (9.00) ** ** (13.24) (11.94) ** ** (16.01) (12.82) ** ** (17.30) (16.62) ** ** (10.86) (11.24) Interction effects between ge nd liner trend trend * gegroup (1.11) (0.62) trend * gegroup ** (1.77) (3.88) trend * gegroup ** 0.005** (2.98) (3.66) trend * gegroup ** 0.007** (3.40) (5.60) trend * gegroup ** 0.008** (4.91) (5.97) trend * gegroup ** 0.009** (3.33) (6.28) trend * gegroup ** (1.89) (3.13) Observtions 270, ,166 Pseudo R squred Notes: The column entitled M.E. represents mrginl effects, bsolute vlues of z-sttistic re presented in prentheses. **, *, nd + indicte sttisticl significnce t the 1, 5, nd 10 percent level. Not presented re the seprte effects of indictors for 15 federl sttes, 10 industries, nd the personl nd job chrcteristics described in Tble 2. The estimtions re bsed on observtions over 9 yers (1996 to 204). 22

24 Tble 5 Increse in the Predicted Probbility of Trining bsed on the Probit Estimtions in Tble 4 (in percent) Age group low skill high skill Note: The reference person is mrried, mle, Germn, blue collr worker. He works in Berlin in firm with more thn 50 workers in the mnufcturing industry. The entries were clculted s ((predicted probbility 2004 / predicted probbility 1996) 1) * 100 %. 23

25 Appendix Wording of questions nd coding of the indictor for the first nd lst wve (1996 nd 2004) We coded the trining prticiption indictor bsed on these questions of the surveys: 1996 Question EF 293: Do you currently prticipte in voctionl trining, continuing eduction or re-trining, or did you do so within the lst four weeks? If nswer is No, question EF 294 is sked: Hve you since the end of April 1995 prticipted in voctionl trining, continuing eduction, or re-trining? The indictor ws coded Yes if either question EF 293 or question EF 294 were nswered positively Question EF 275: Hve you prticipted in one or severl generl or voctionl trinings, be it course, seminr, conference, or privte instruction, since the end of Mrch of 2003 or re you currently prticipting? If nswer is Yes, question EF 276 is sked: Wht ws the purpose of this trining? (Answer options: professionl / privte.) The indictor ws coded Yes if, both, question EF 275 ws nswered positive nd the nswer to question EF276 ws "professionl". Originl Germn lnguge wording of the questions: 1996 EF 293: Nehmen Sie gegenwärtig n einer beruflichen Ausbildung, Fortbildung oder Umschulung teil, oder hben Sie n einer solchen in den letzten vier Wochen teilgenommen? EF 294: Hben Sie seit Ende April 1995 n einer beruflichen Ausbildung, Fortbildung oder Umschulung teilgenommen? 2004 EF 275: Hben Sie seit Ende März 2003 n einer oder mehreren Lehrvernstltung(en) der llgemeinen oder beruflichen Weiterbildung in Form von Kursen, Seminren, Tgungen oder Privtunterricht teilgenommen oder nehmen Sie gegenwärtig teil? EF 276: Ws ist (oder wr) der Zweck dieser Lehrvernstltung)? (Beruflich / Privt) 24