Worker Runs

Florian Hoffmann and Vladimir Vladimirov

No 17419, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The voluntary departure of hard-to-replace skilled workers worsens firm prospects, which can prompt additional departures. We develop a model in which firms design compensation to limit the risk of such "worker runs." To achieve cost-efficient retention, firms combine fixed wages with dilutable compensation --- such as vesting equity or bonus pools --- that pays remaining workers more when others leave but gets diluted otherwise. Compensating (identical) workers with differently-structured compensation --- that is, with a different mix of output-dependent and -independent pay --- can further help mitigate the worker run problem by ensuring a critical retention level in a cost-efficient way.

Keywords: Compensation structure of non-executive employees; High-skilled employees; Contagious turnover; Worker runs; Worker bargaining power; Financing labor (search for similar items in EconPapers)
JEL-codes: G32 J33 J54 M52 (search for similar items in EconPapers)
Date: 2022-06
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP17419 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:17419

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP17419

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().