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New research findings on apprenticeships PDF Print E-mail
Thursday, 01 March 2018
New research reports from the Centre for Economic Performance (CEP) at the London School of Economics are highlighted in the Spring 2018 CentrePiece magazine.  

Among the findings:
APPRENTICESHIPS: High potential payoffs but variation by subject specialism
BREXIT: Leave vote benefited from feelings of social and economic exclusion
HOUSING: Planning policy creates more empty homes and longer commutes
FAMILY FIRMS: The weak management practices of second-generation bosses
PRE-SCHOOL: Free entitlement to early education has failed to deliver benefits
ITALIAN PRODUCTIVITY: Long-lasting stagnation in Europe’s ‘sleeping beauty’
LOCAL LABOUR MARKETS: Tools for analysing effects of place-based policies
LOST EINSTEINS: American evidence on who grows up to be an inventor

Is there a payoff to apprenticeships for young people?
There is a high potential payoff to starting an apprenticeship in the UK, though much like university degrees, the returns vary considerably across subject specialisms. What’s more, there is inequality of opportunity when it comes to who can get on to an apprenticeship. These are among the findings of research by Chiara Cavaglia, Sandra McNally and Guglielmo Ventura.

As part of an effort to transform the UK’s post-16 educational landscape, the government is aiming for a massive increase in the number of apprenticeships. This study finds that the earnings differential from starting an apprenticeship over leaving education with A-levels is over three times larger for men than for women.

Brexit: the economics of international disintegration
The Brexit campaign succeeded because it received the support of a coalition of voters who felt left behind by ‘modern Britain’. But those ‘left-behind’ voters who blame the European Union (EU) for their economic problems will need policies other than Brexit to address the underlying causes of their discontent.

These are among the conclusions of research by Thomas Sampson. He notes that pro-Brexit rhetoric mixes up two distinct interpretations of what made people vote to Leave the EU – and they have very different policy implications. Those voters wanting to reclaim sovereignty may view the likely negative economic impact as a price worth paying. But if misinformation drove support for Brexit, then leaving the EU will do nothing to mitigate voters’ discontent.

Empty homes, longer commutes
The net effect of more local planning restrictions in Britain is to increase the proportion of empty homes substantially. Unless we understand why houses are vacant, we cannot hope to reduce the numbers that are empty just by being more restrictive. And aiming for a ‘compact city’ makes planning policy more restrictive, with unintended consequences that include raising average commuting distances.

These are among the findings of research by Paul Cheshire, Christian Hilber and Hans Koster. Observing that in areas of Britain where there are empty houses, planners typically allocate less land for development and make it more difficult to build or adapt houses, their study reveals the unintended and undesirable consequences of additional local restrictions – including more, not fewer, empty homes and longer commutes.

Family firms: the problem of second-generation bosses
Dynastic family-owned firms have worse management practices, but only if they are run by family CEOs. That is one of the findings of research by Daniela Scur and Renata Lemos on the performance of ‘dynastic’ family-owned firms and why those led by family bosses adopt fewer structured management practices.

They note that although family firms are widely praised as the ‘backbone of the economy’, their productivity is often hampered by weak management. It is therefore crucial to understand the barriers to investment in better management practices within family firms.

One particular constraint explored in this study is the ‘reputation costs’ for family firms of firing workers, which may deter them from adopting better management practices. These firms could hire professional CEOs, but there are often institutional constraints, particularly in emerging economies.

Nursery attendance and children’s outcomes
The UK government has expanded the popular ‘free entitlement’ to part-time early education and care from a universal 15 hours per week to 30 hours per week for working parents. But research by Jo Blanden and co-authors reveals that the original policy was less beneficial for children’s development than might have been hoped.

Their study shows that the pre-school experience delivered by the free entitlement is not leading to sustained benefits. The effects of an extra term in nursery are substantially smaller than the benefits of an extra term in the first year of school. Overall, the free entitlement to part-time early education and care has failed to live up to expectations.

Poor productivity: an Italian perspective
Misallocation of capital and labour has played a sizeable role in slowing down Italian productivity growth over the past 25 years. But resource misallocation has increased more within sectors than between them; and it has risen more in sectors where the world technological frontier has expanded faster. What’s more, misallocation has increased particularly in the regions of Northern Italy, which traditionally are the driving forces of the economy.

These are among the findings of research by Fadi Hassan and Gianmarco Ottaviano, which investigates inefficiency and misallocation in the Italian economy to draw broader lessons about what lies behind the ‘productivity puzzle’. They note that productivity growth has been slow in all Western countries since the global financial crisis, but in Italy it has been stagnating for 25 years. Italy is the ‘sleeping beauty of Europe’ – a country rich in talent and history but suffering from a long-lasting stagnation.

How ‘local’ are local labour markets?
If we want to create jobs in disadvantaged local areas, the idea of ‘local’ needs to be revisited. New research by Alan Manning and Barbara Petrongolo explains the problem of thinking of geographical space as non-overlapping single labour markets. Their study, which draws on evidence from job openings in London ahead of the 2012 Olympics, provides a useful toolkit to understand the likely impact of place-based policies.

They explain that a local labour market’s size is determined by the cost of distance – measured as geographical distance, commuting time or commuting cost. New job openings attract not only local workers, but also those living in surrounding areas. Even strong local stimulus has a limited bite on the local outflow rate from unemployment. So, for example, in the run-up to the 2012 Olympics, there was a spike in vacancies in and around Stratford but hardly any increase in job finding for the local unemployed.

Lost Einsteins: who becomes an inventor in America?
There are many ‘lost Einsteins’ – people who would have had high-impact inventions had they become inventors – according to research by John Van Reenen and colleagues, which analyses data on the lives of more than one million inventors in America.

Their study finds that children from high-income American families are ten times more likely to become inventors than children from low-income families. What’s more, if girls were as exposed to female inventors as boys are to male inventors, the gender gap in innovation would fall by half. They conclude that improving opportunities for disadvantaged children may be valuable not just to reduce disparities but also to spur greater innovation and productivity growth.

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