The retention effect of training : portability, visibility, and credibility

This paper analyses the effect of training participation on employees’ retention in the training company. It for the first time empirically combines the human capital and the monopsony theory by jointly controlling for the portability, visibility, and credibility of training. Based on an extensive German linked-employer-employee data set with detailed information on training history (WeLL-ADIAB), we show that training increases employees’ retention. We compare the probability to stay at the same employer between training participants and accidental training non-participants (those who could not participate in planned training on the basis of exogeneous reasons). Higher portability of general human capital contents and visibility of training induced by training certificates however reduce the retention effect of training. Retention is further reduced when training is credibly provided and certified by external institutions, the full training effect on retention is still positive, however. We are careful to control for endogeneity of training participation in retention equations, unobserved time-invariant effects, and extensive individual and employer characteristics including wage increases and general job satisfaction.