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Inefficient Worker Turnover

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  • Nicolas L. Jacquet

    (SMU)

Abstract

This paper considers the efficiency properties of risk-neutral workers mobility decisions in an equilibrium model with search frictions, but no search externalities, when the rent accruing to a match is split through bargaining. Matches are ex ante homogeneous and their true productivity is learnt after the match is formed. It is shown that the efficiency of worker turnover depends on contract enforceability, and that in the absence of complete enforceability the equilibrium fails to be efficient. This is because without complete enforceability firms cannot credibly offer workers contracts that will guarantee them the entire future of all potential future matches.

Suggested Citation

  • Nicolas L. Jacquet, 2007. "Inefficient Worker Turnover," Labor Economics Working Papers 22450, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:laborw:22450
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    References listed on IDEAS

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    More about this item

    Keywords

    On-the-Job Search; Learning; Bargaining; contracts; Enforceability;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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