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

Listed author(s):
  • Mitchell Hoffman
  • Stephen V. Burks

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 23247.

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Date of creation: Mar 2017
Handle: RePEc:nbr:nberwo:23247
Note: LE LS PE POL PR
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  1. Brice Corgnet & Joaquín Gómez-Miñambres & Roberto Hernán-González, 2015. "Goal Setting and Monetary Incentives: When Large Stakes Are Not Enough," Management Science, INFORMS, vol. 61(12), pages 2926-2944, December.
  2. Jonathan Gruber & Brigitte C. Madrian, 2002. "Health Insurance, Labor Supply, and Job Mobility: A Critical Review of the Literature," JCPR Working Papers 255, Northwestern University/University of Chicago Joint Center for Poverty Research.
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