Education and Training in Europe

While Europe is certainly one of the richest and most educated areas of the world, some of the challenges faced by the old continent are staggering: low economic growth, structural difficulties in the labour market, and increasing international competition. Politicians and policymakers may advocate different means of overcoming the potential economic decline of Europe, but most agree that Europe needs to strengthen human capital, its ultimate competitive advantage in the world economy. This book looks at the accumulation of human capital from two perspectives, first through formal education and then professional training. It provides a useful summary of the key characteristics of education and training in Europe and also asks key questions about the fundamental problems with the current educational and training systems. More importantly, the book goes on to discuss which policies are necessary to make existing education and training systems more efficient, while also making higher skills available to a wider range of people.

Giorgio Brunello holds a MsC in Economics from the LSE and a PhD in Economics from Osaka University, Japan. He has taught at Osaka, Venice, and is currently Professor of Economics in Padova. He is a Research Fellow at IZA (Bonn) and CESifo (Munich). Pietro Garibaldi is Professor of Economics at the University of Turin, and acts as Economic Counselor of the Italian Ministry of Finance. He is also head of Labor Studies for the Fondazione Debenedetti and research fellow at IGIER, CEPR, and IZA. He holds a PhD in Economics from the London School of Economics. He was previously an economist in the IMF Research Department and an associate professor of Economics at Bocconi University. Etienne Wasmer is Professor of Economics at Sciences Po. Paris and at Universite du Quebec a Montreal. He is also a Research Fellow in both the Labour Program and the International Macro Program of CEPR. Etienne received a Ph.D. in Economics from the London School of Economics. He is also associate editor of the French think tank on-line telos, and been a consultant for the European Commission for the Socio-Economic Impact of the Cohesion Fund and the Ministry of Finance in Quebec. He is currently External Member of the Council of Economic Advisors of the French Prime Minister.

List of Figures	p. xi
List of Tables	p. xiii
List of Contributors	p. xvii
Preface	p. xix
The Macroeconomics of Education	p. 1
Introduction	p. 3
Background	p. 3
Organization and summary of the report-Part 1	p. 4
Theory and facts	p. 4
The growth vs. cohesion trade-off	p. 4
Improving the trade-off: a study of mismatch, mobility and skill specialization	p. 6
Policy Implications	p. 8
Theory and Facts	p. 9
A brief theoretical perspective on human capital investment with a focus on institutions	p. 9
Introduction	p. 9
Theory	p. 9
Perfect financial markets	p. 9
Financial imperfections	p. 10
Life-cycle and on-the-job investments	p. 13
Labour market frictions	p. 13
Conclusions of the theory part	p. 14
Classification of education	p. 15
The supply of education and its trends	p. 18
Financing and quality	p. 22
Returns to education: unemployment, wages, mobility	p. 25
Wage returns to education	p. 25
Employment and unemployment	p. 28
Geographical mobility	p. 31
Conclusion	p. 35
Education Priorities: Growth vs. Cohesion
Cohesion and the Supply of General Skills in Europe	p. 36
Introduction	p. 36
Schooling and skills by cohort: a long-run perspective	p. 36
Data description	p. 37
Schooling and skills by cohort	p. 39
The skills among those still in school	p. 47
Mean student performance	p. 47
Student/teacher ratios	p. 49
Equality	p. 51
Implications for wage inequality	p. 52
Concluding remarks	p. 54
Higher Education, Innovation and Growth	p. 56
Introduction	p. 56
A survey of the effects of education on growth	p. 57
International migration, the brain drain and 'talents'	p. 59
Immigration to the EU and the USA: size and composition	p. 59
'Talents': analysing their mobility and contribution	p. 63
Highly educated, productivity and innovation	p. 66
Quality of highly skilled foreign-born in the US	p. 66
Effect on innovation	p. 68
Conclusions	p. 70
The Margins of Improvement of Education Institutions: Skill Mismatch, Skill Portability and Mobility
Internal Mobility, Skills and Education	p. 71
Introduction	p. 71
Internal mobility: EU versus USA	p. 72
Mobility and education in Europe	p. 73
Introduction	p. 73
Data: ECHP and geographical mobility	p. 75
More descriptive statistics on mobility	p. 76
Theory	p. 78
First strategy: comparing job-related mobility and mobility for other reasons	p. 80
Second strategy: estimating the income gain from migration	p. 85
Further comments on mobility and education	p. 88
Determinants of mobility of highly skilled workers across US state data	p. 88
Conclusions	p. 90
Skill Mismatch and Over-qualification in the Enlarged Europe	p. 91
Introduction	p. 91
A brief survey of the literature	p. 92
Skill mismatch and over-qualification in the EU-15	p. 93
Who is over-qualified or mismatched?	p. 97
Over-qualification, skills mismatch and wages	p. 101
Education mismatch in a transition economy: the case of Poland	p. 104
Returns to over-under-education	p. 106
Nature of education mismatch in Poland	p. 108
Overall conclusions	p. 110
Specificity of Skills and Reallocation	p. 111
Introduction	p. 111
Skill specialization in Europe	p. 111
Measurement of specific skills	p. 114
An application to two accession countries, Poland Estonia	p. 115
Policy implications	p. 118
References	p. 122
Appendices	p. 131
Comments	p. 134
Juan J. Dolado	p. 134
Daniel Gros	p. 140
Workplace Training in Europe	p. 143
Introduction	p. 145
An Overview of the Theoretical Framework	p. 158
The received wisdom	p. 158
Challenges to this orthodoxy	p. 159
An overview of the various approaches and their empirical predictions	p. 161
General training in a perfectly competitive labour market	p. 161
Imperfect capital markets and general training	p. 161
Pure specific training	p. 162
Mixture of training types	p. 162
Oligopsonistic wage setting	p. 163
Asymmetric information	p. 164
Comparisons of predictions of these models	p. 165
A clarification of wage compression	p. 165
Is there under-provision of training?	p. 167
Is there an equity issue?	p. 169
Institutions	p. 170
Trade unions	p. 170
Otherwise competitive labour markets	p. 171
Imperfectly competitive labour markets	p. 171
Union concern over the wage-employment package	p. 173
Labour turnover	p. 173
Unions' use of training to control labour supply	p. 174
Selectivity and other issues	p. 174
Minimum wages	p. 175
Taxes and social security systems	p. 176
Product market competition and deregulation	p. 176
Schooling institutions	p. 177
Summary	p. 177
	p. 179
	p. 182
	p. 184
Unions	p. 184
Product market regulation	p. 185
Stylized Facts about Workplace Training	p. 187
Measurement issues	p. 188
The distribution of training across countries and regions	p. 193
Who pays for training?	p. 197
The distribution of training investments across firms	p. 201
Training differences across employees	p. 205
Summary	p. 214
Description of the Datasets and Supplementary Tables	p. 216
Training and Labour Market Institutions	p. 232
Previous empirical literature	p. 233
Unions and training	p. 233
Minimum wages and training	p. 234
Flexible labour contracts and training	p. 235
Product market competition, employment protection and training	p. 235
Schooling and training	p. 236
Training and pensions	p. 236
The data	p. 237
The empirical set-up	p. 243
The empirical results	p. 244
Summary	p. 251
The Costs and Benefits of Workplace Training	p. 253
Estimating the private returns to training	p. 254
Identification	p. 254
Rates of return	p. 256
Returns to employees	p. 257
The US evidence	p. 258
The European evidence	p. 261
Evidence from the ECHP	p. 263
Are the wage returns to training really high?	p. 265
Summary	p. 267
Returns to employers	p. 267
Training and growth	p. 270
Summary	p. 270
Is There Scope for Policy?	p. 272
Policy responses to market failures in training provision	p. 273
Under-provision: what is the evidence?	p. 273
Training and turnover	p. 276
Credit constraints	p. 278
Is there an equity issue?	p. 278
What do we learn from the empirical evidence?	p. 282
A political economy approach	p. 282
Policies offering financial support to workplace training	p. 283
Labour market policies and training	p. 287
Summary	p. 289
A Simple Political Economy Model of Training Subsidies	p. 290
Training Policies in Europe	p. 293
Regulation: pay-back clauses, time working accounts and apprenticeship contracts	p. 293
Co-financed schemes directed at firms	p. 301
Co-financed schemes directed to individuals	p. 306
References	p. 310
Comments	p. 324
Giuseppe Bertola	p. 324
Jorn-Steffen Pischke	p. 330
Final Remarks	p. 343
Index	p. 349
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Education and Training in Europe

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