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Should I stay or should I go? - The Effect of Performance Pay on the Retention of Apprenticeship Graduates

  • Rinawi, Miriam
  • Backes-Gellner, Uschi

This paper investigates how training firms retain their apprenticeship graduates if they are embedded in labor markets without the frictions that the new training literature considers to be essential for investments in general human capital. We hypothesize that performance pay schemes are an additional firm-level tool to increase the retention of graduates. We argue that firms with performance pay schemes are more likely to engage in apprenticeship training than firms not offering performance pay. This paper uses representative data from a large employer-employee panel data set and accounts for unobserved heterogeneity by employing fixed-effects estimations. We find that the performance pay rate has a significantly positive effect on a firm's share of internal apprenticeship graduates. Our results can be interpreted as an indication that performance pay firms are more likely to invest in training, as they can successfully retain their graduates.

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Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 80024.

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Date of creation: 2013
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Handle: RePEc:zbw:vfsc13:80024
Contact details of provider: Web page: http://www.socialpolitik.org/
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  18. Christian Rupietta & Uschi Backes-Gellner, 2012. "High quality workplace training and innovation in highly developed countries," Economics of Education Working Paper Series 0074, University of Zurich, Institute for Strategy and Business Economics (ISU), revised Jan 2015.
  19. Lindley, Robert M, 1975. "The Demand for Apprentice Recruits by the Engineering Industry, 1951-71," Scottish Journal of Political Economy, Scottish Economic Society, vol. 22(1), pages 1-24, February.
  20. Enrico Moretti, 2004. "Workers' Education, Spillovers, and Productivity: Evidence from Plant-Level Production Functions," American Economic Review, American Economic Association, vol. 94(3), pages 656-690, June.
  21. Alfonso Sousa-Poza & Fred Henneberger, 2000. "Wage data collected by telephone interviews: an empirical analysis of the item nonresponse problem and its implications for the estimation of wage functions," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 136(I), pages 79-98, March.
  22. Dustmann, Christian & Schönberg, Uta, 2004. "Training and Union Wages," IZA Discussion Papers 1435, Institute for the Study of Labor (IZA).
  23. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
  24. Regina Dionisius & Samuel Muehlemann & Harald Pfeifer & Günter Walden & Felix Wenzelmann & Stefan C. Wolter, 2008. "Cost and Benefit of Apprenticeship Training – A Comparison of Germany and Switzerland," CESifo Working Paper Series 2287, CESifo Group Munich.
  25. Stevens, Margaret, 1994. "An Investment Model for the Supply of Training by Employers," Economic Journal, Royal Economic Society, vol. 104(424), pages 556-70, May.
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  28. Jens Mohrenweiser & Uschi Backes-Gellner, 2010. "Apprenticeship training: for investment or substitution?," International Journal of Manpower, Emerald Group Publishing, vol. 31(5), pages 545-562, September.
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