Supply shocks in the market for apprenticeship training

We present a model with heterogeneous inputs and constant elasticity of substitution to examine the possible effects of a supply shock in the market for apprenticeshiptraining. The model’s predictions are tested using data from a German high school reform that led to a one-time increase in the supply of highly educated apprentices. A difference-in-differences estimation strategy exploits regional variation in the timing of implementation, and an instrumental variable approach identifies the supply shock effects. We find that apprenticeship contracts among individuals with a high school degree increased by 7.8%, while apprentice wages were unaffected by the supplyshock. Moreover, we find no evidence of substitution effects, as the number of training contracts among individuals with a lower-level school degree remained unchanged. Our model predicts that such effects may occur when wages are sticky for apprentices witha high level of education relative to their productivity, which signals inefficiencies in the market for apprenticeship training