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Labour Turnover and Labour Productivity in a Retail Organization

William Siebert (), Nick Zubanov (), Arnaud Chevalier and Tarja Viitanen

No 2322, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We study the impact of labour turnover on labour productivity using a panel dataset of 347 shops belonging to a large UK clothing retailer over1995-1999. For the within-shop link – holding constant the shop’s permanent characteristics – we observe an inverted U-shape effect of labour turnover on productivity. The productivity-maximizing rates of FTE-adjusted quits and hires are each about 20% per year, improving productivity by 2.5% compared to the zero turnover level. We explain the difference between this optimal level of labour turnover and its observed average (quits and hires each around 10%) through the costs of hiring estimated at about £600 per hire. By contrast, between shops, there is a positive link between average rates of turnover and average productivity, suggesting that an unobservable management quality factor generates both high turnover and productivity, which we discuss.

Keywords: matched employee-firm panel data; retailing; labour turnover; labour productivity (search for similar items in EconPapers)
JEL-codes: J63 J24 L81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-eff, nep-hrm and nep-lab
Date: 2006-09
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Published in: Academy of Management Journal, 2009, 52 (2), 294-313

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