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Labour Turnover and Labour Productivity in a Retail Organization

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Author Info

  • Siebert, W. Stanley

    ()
    (University of Birmingham)

  • Zubanov, Nikolay

    ()
    (Goethe University Frankfurt)

  • Chevalier, Arnaud

    ()
    (Royal Holloway, University of London)

  • Viitanen, Tarja

    ()
    (University of Otago)

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.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2322.

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Length: 29 pages
Date of creation: Sep 2006
Date of revision:
Publication status: published in: Academy of Management Journal, 2009, 52 (2), 294-313
Handle: RePEc:iza:izadps:dp2322

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Keywords: matched employee-firm panel data; retailing; labour turnover; labour productivity;

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