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How Costly Is Turnover? Evidence from Retail

Peter Kuhn and Lizi Yu

Journal of Labor Economics, 2021, vol. 39, issue 2, 461 - 496

Abstract: We estimate turnover costs in small retail sales teams using daily sales data and an advance notice requirement to address endogeneity concerns. In addition to short-staffing and onboarding costs, we identify two less familiar sources of turnover costs: incumbent workers’ recruitment activities and reductions in team morale after a departure is announced. Our estimates of total turnover costs are relatively modest, however: 10% higher turnover is about as costly as a 0.6% wage increase. We attribute these low costs to a set of complementary personnel policies that ensure that only 25% of departures result in a short-staffing spell.

Date: 2021
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