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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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  1. repec:ner:tilbur:urn:nbn:nl:ui:12-3583553 is not listed on IDEAS
  2. 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.
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  13. Harhoff, Dietmar & Kane, Thomas J, 1996. "Is the German Apprenticeship System a Panacea for the US Labour Market?," CEPR Discussion Papers 1311, C.E.P.R. Discussion Papers.
  14. Regina Dionisius & Samuel Muehlemann & Harald Pfeifer & Günter Walden & Felix Wenzelmann & Stefan C. Wolter, 2009. "Costs and Benefits of Apprenticeship Training. A Comparison of Germany and Switzerland," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 55(1), pages 7-37.
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  17. Daron Acemoglu & Jörn-Steffen Pischke, 1998. "Why Do Firms Train? Theory And Evidence," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 78-118, February.
  18. Harminder Battu & Clive R. Belfield & Peter J. Sloane, 2003. "Human Capital Spillovers within the Workplace: Evidence for Great Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(5), pages 575-594, December.
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  20. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  21. Kessler, Anke & Lülfesmann, Christoph, 2000. "The Theory of Human Capital Revisited: On the Interaction of General and Specific Investments," CEPR Discussion Papers 2533, C.E.P.R. Discussion Papers.
  22. Zweimuller, Josef, 1992. "Survey non-response and biases in wage regressions," Economics Letters, Elsevier, vol. 39(1), pages 105-109, May.
  23. 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.
  24. Loewenstein, Mark A & Spletzer, James R, 1998. "Dividing the Costs and Returns to General Training," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 142-71, January.
  25. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
  26. 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.
  27. John M. Barron & Mark C. Berger & Dan A. Black, 1999. "Do Workers Pay for On-The-Job Training?," Journal of Human Resources, University of Wisconsin Press, vol. 34(2), pages 235-252.
  28. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
  29. 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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