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

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  • Mitchell Hoffman
  • Stephen V. Burks

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

  • Mitchell Hoffman & Stephen V. Burks, 2017. "Training Contracts, Employee Turnover, and the Returns from Firm-sponsored General Training," NBER Working Papers 23247, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:23247
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    Cited by:

    1. Mitchell Hoffman & Steven Tadelis, 2021. "People Management Skills, Employee Attrition, and Manager Rewards: An Empirical Analysis," Journal of Political Economy, University of Chicago Press, vol. 129(1), pages 243-285.
    2. Sauermann, Jan, 2015. "Worker Reciprocity and the Returns to Training: Evidence from a Field Experiment," IZA Discussion Papers 9179, Institute of Labor Economics (IZA).
    3. Nathaniel Hilger, 2017. "All Together Now: Leveraging Firms to Increase Worker Productivity Growth," NBER Working Papers 23905, National Bureau of Economic Research, Inc.
    4. Caliendo, Marco & Cobb-Clark, Deborah A. & Pfeifer, Harald & Uhlendorff, Arne & Wehner, Caroline, 2024. "Managers’ risk preferences and firm training investments," European Economic Review, Elsevier, vol. 161(C).
    5. Jonathan R. Peterson, 2023. "Employee bonding and turnover efficiency," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 32(1), pages 223-244, January.

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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • M53 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Training

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