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An analysis of quit and dismissal determinants between 1988 and 1999 using the bivariate probit model

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  • Orellano, Verônica Inês Fernandez
  • Picchetti, Paulo
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    Abstract

    Excessive labor turnover may be considered, to a great extent, an undesirable feature ofa given economy. This follows from considerations such as underinvestment in humancapital by firms. Understanding the determinants and the evolution of turnover in aparticular labor market is therefore of paramount importance, including policy considerations.The present paper proposes an econometric analysis of turnover in the Brazilianlabor market, based on a partial observability bivariate probit model. This model considersthe interdependence of decisions taken by workers and firms, helping to elucidate thecauses that lead each of them to end an employment relationship. The Employment andUnemployment Survey (PED) conducted by the State System of Data Analysis (SEADE)and by the Inter-Union Department of Statistics and Socioeconomic Studies (DIEESE)provides data at the individual worker level, allowing for the estimation of the joint probabilitiesof decisions to quit or stay on the job on the worker’s side, and to maintain orfire the employee on the firm’s side, during a given time period. The estimated parametersrelate these estimated probabilities to the characteristics of workers, job contracts,and to the potential macroeconomic determinants in different time periods. The resultsconfirm the theoretical prediction that the probability of termination of an employmentrelationship tends to be smaller as the worker acquires specific skills. The results alsoshow that the establishment of a formal employment relationship reduces the probabilityof a quit decision by the worker, and also the firm’s firing decision in non-industrialsectors. With regard to the evolution of quit probability over time, the results show thatan increase in the unemployment rate inhibits quitting, although this tends to wane asthe unemployment rate rises.

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    Bibliographic Info

    Paper provided by Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil) in its series Textos para discussão with number 271.

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    Date of creation: 01 Sep 2010
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    Handle: RePEc:fgv:eesptd:271

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