The economics of apprenticeship

To understand the economic nature and impact of apprenticeship, we have to be alert to its features as an economic institution. Skills are often tacit or ‘implicit’ knowledge. Moreover, the apprenticeship contract is an unequal and non-repeated exchange between two parties, where the master teaches in the expectation that the apprentice will repay him through his work. The informational asymmetry led to contractual issues that required institutions that each had their own agendas and challenges. Guilds might want to limit entry, but their members also needed skilled workers; private contracts might be difficult and expensive to enforce and for outsiders to observe. Still, these institutions together allowed large numbers of youngsters to be apprenticed outside their family circle, with potentially large human capital effects. After 1500, the institutional forms of apprenticeship contracts in Europe were decisive in determining the rate at which innovations could spread across the larger environment and across communities.