Quitting and labor turnover: microeconomic evidence and macroeconomic consequences

Tom Krebs and William Maloney

No 2068, Policy Research Working Paper Series from The World Bank

Abstract: Combining microeconomic evidence with macroeconomic theory, the authors present an integrated approach to wage and employment determination in an economy where firms pay above market"efficiency wages"to prevent trained workers from quitting. The model offers predictions about the behavior of formal employment, labor turnover, and segmentation in response to formal sector productivity shocks (including economic growth and tax reductions), changes in the desirability of self-employment (formal sector tax rates), and the cost of training a new worker. They use panel data from Mexican labor surveys to estimate the quit function derived fromthe model and the results support their view that transitions from formal salaried work to informal self-employment are quits rather than fires. (Quitting is positively related to the mean self-employment income and the probability of being rehired and negatively related to the mean formal salaried wage.) They then use the parameters estimated from the quit function to calibrate the model economy and simulate the impacts of economic shocks and policy innovations and find the impact on employment, turnover, and segmentation to be substantial.

Keywords: Environmental Economics&Policies; Public Health Promotion; Labor Policies; Economic Theory&Research; Labor Management and Relations; Health Monitoring&Evaluation; Banks&Banking Reform; Environmental Economics&Policies; Economic Theory&Research; Labor Management and Relations (search for similar items in EconPapers)
Date: 1999-02-28
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Citations: View citations in EconPapers (4)

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