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The Impact of Labour Turnover: Theory and Evidence from UK Micro-Data

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Author Info
Gaia Garino ()
Christopher Martin

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Abstract

We analyse the impact of labour turnover on profits. We extend the efficiency wage model of Salop (1979) by separating incumbent and newly hired workers in the production function. We show that an exogenous increase in the turnover rate can increase profits, but only where firms do not choose the wage. This effect of turnover varies across firms as it depends on turnover costs, the substitutability of incumbents and new hires and other factors. We test our model on UK cross-sectional establishment-level data. We find that our predictions are consistent with the data.

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File URL: http://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp05-10.pdf
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Publisher Info
Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 05/10.

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Date of creation: May 2005
Date of revision: May 2007
Handle: RePEc:lec:leecon:05/10

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Related research
Keywords: Labour Turnover; Turnover Costs; Optimal Turnover;

Find related papers by JEL classification:
J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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This page was last updated on 2009-12-16.

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