Working Paper: NBER ID: w23247
Authors: 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.
Keywords: Training Contracts; Employee Turnover; Firm-Sponsored Training
JEL Codes: J24; J41; M53
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Reduced quitting rates (J26) | Increased firm profits (L21) |
| Training contracts (M53) | Strong incentives for retention (M51) |
| Training contracts (M53) | Reduced quitting rates (J26) |
| Training contracts (M53) | Decreased worker welfare (J89) |
| Training contracts (M53) | Influence on worker behavior (M54) |