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

Miriam Rinawi and Uschi Backes-Gellner
Authors registered in the RePEc Author Service: Miriam Koomen

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: 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.

JEL-codes: J24 J33 C23 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-bec and nep-hrm
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Related works:
Journal Article: Firms’ method of pay and the retention of apprentices (2020) Downloads
Working Paper: The Effect of Performance Pay on the Retention of Apprenticeship Graduates: A Panel Data Analysis (2016) Downloads
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