Training Contracts, Employee Turnover, and the Returns from Firm-Sponsored General Training

36 Pages Posted: 20 Mar 2017

See all articles by Mitchell Hoffman

Mitchell Hoffman

University of Toronto - Rotman School of Management; National Bureau of Economic Research (NBER)

Stephen V. Burks

University of Minnesota, Morris - Division of Social Science; Institute for the Study of Labor (IZA); Center for Decision Research and Experimental Economics (CeDEx); Center for Transportation Studies, University of Minnesota

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Date Written: March 2017

Abstract

Firms may be reluctant to provide general training if workers can quit and use their gained skills elsewhere. “Training contracts” that impose a penalty for premature quitting can help alleviate this inefficiency. Using plausibly exogenous contractual variation from a leading trucking firm, we show that two training contracts significantly reduced post-training quitting, particularly when workers are approaching the end of their contracts. Simulating a structural model, we show that observed worker quit behavior exhibits aspects of optimization (for one of the two contracts), and that the contracts increased firm profits from training and reduced worker welfare relative to no contract.

Suggested Citation

Hoffman, Mitchell and Burks, Stephen V., Training Contracts, Employee Turnover, and the Returns from Firm-Sponsored General Training (March 2017). NBER Working Paper No. w23247, Available at SSRN: https://ssrn.com/abstract=2937517

Mitchell Hoffman (Contact Author)

University of Toronto - Rotman School of Management ( email )

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Stephen V. Burks

University of Minnesota, Morris - Division of Social Science ( email )

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