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PRODUCTIVITY GAINS FROM LABOUR CHURNING IN ECONOMIC CRISIS: DO FOREIGN FIRMS GAIN MORE?

Liis Roosaar, Urmas Varblane () and Jaan Masso ()

No 125, University of Tartu - Faculty of Economics and Business Administration Working Paper Series from Faculty of Economics and Business Administration, University of Tartu (Estonia)

Abstract: The purpose of this paper is to clarify whether domestic or foreign firms gained more from labour churning while adjusting to the Great Recession in Estonia. During times of high unemployment, all firms can raise their requirements for new employees, but in times of crisis foreign firms may have more resources available for restructuring. We analysed matched employee-employer data from Estonian firms from 2006 to 2013, and show that an increase in labour churning is related to a positive change in labour productivity during economic crisis. During boom years churning is related to a negative change in labour productivity. In both cases a slightly upward convex pattern can be noticed. Only in services during the crisis did foreign firms have a stronger positive relationship between labour churning and labour productivity changes than domestic firms. However, our analysis at the individual level does not confirm that during a crisis foreign firms hire more employees with characteristics that have been found to be related to productivity increases. We also show empirically that hiring employees who relatively often change jobs is negatively related to changes in labour productivity. In light of the world-wide virus-related crisis of 2020, this paper proves that economic downturns can be a good opportunity to restructure the pool of employees.

Keywords: labour productivity; labour churning; economic recession/crisis; Estonia (search for similar items in EconPapers)
Pages: 41 pages
Date: 2020
New Economics Papers: this item is included in nep-eff and nep-tra
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