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Do public apprenticeship schemes induce substitution effects and benefit firms? Short-term impacts of dual apprenticeships in Côte d’Ivoire
The cost-effectiveness of public apprenticeship schemes depends not only on returns to apprentices, but also on whether firms substitute traditional apprentices with program apprentices or benefit in other ways. Substitution effects or impacts on firms are rarely quantified, however. This paper provides novel evidence on the short-term impacts of a dual apprenticeship program on youths and firms in Cote d’Ivoire. The experiment randomized whether apprenticeship positions opened by firms were filled through a public scheme, and whether interested youths were assigned to a formal apprenticeship. The program offered a stipend paid directly to the apprentice, and complemented practical on-the-job training with mentoring and theoretical training. The paper documents how the intervention had a range of indirect effects on private apprenticeship arrangements. Among youths, the net impact on the share of youths in apprenticeship is estimated between 36.8 to 46.4 percent. Participation in the apprenticeship program has substantial and heterogeneous opportunity cost for youths, but the stipend compensates average losses in labor earnings. The study documents that there are substitution effects on informal apprentices in program firms. However, the substitution effects are of relatively small magnitude: one program apprentices is estimated to displace 0.19 informal apprentices on average. Overall, firms benefit from program apprentices being more productive, despite lower assiduity. The value-added of additional apprentices is estimated to be greater than the stipend they receive, pointing to frictions in the apprenticeship market.
Written with Rick Premand, World Bank