Introduction:

According to human capital theory, people who invest a specific amount of time and money in education and training should receive a fairly identical level of wages in return. Therefore, the wages of workers who have completed a three-year course of vocational training in the German so-called “dual system” represent a test of the theory. The “dual system” provides a specific form of training in which apprentices are trained in an employing firm and at a vocational school.

Descriptive analyses show that average wages in different occupations differ up to 100 percent one year after finishing the training. In Germany occupational structures in the labour market are more im¬portant than in other countries. This corresponds to a long tradition and to the institutional structures shaping the labour market as it is shown below.

Instead of using descriptive statistics we apply a cross-classified multilevel model to explain occupational wage differentials. This model includes fixed effects to identify specific effects of occupations and regions and to control for the heterogeneity of individual workers. Several theoretical approaches can be used to explain the wage differences, e. g. the hypothesis of compensating wage differentials. Alternatively older approaches of labour market segmentation can be used, which could be renewed by using neo-institutional theory, which fits well into the observed reality of the labour market in Germany and in other countries. The wage differences reflect regulations of the state and of autonomous actions of the individual agents on the market. We will discuss these points below.