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Factors Affecting the Output and Quit Propensities of Production Workers

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  • Roger Klein
  • Richard H. Spady
  • Andrew Weiss

Abstract

We have used a proprietary data set of newly hired semi-skilled production workers at one location of a large unionized firm to investigate several issues in labor economics. This data set is unique in several respects: the workers in our sample faced the same wage schedules, had the same promotional opportunities, the same job tenure (zero), similar working conditions, and had jobs for which we were able to record their physical output. We analyze these data by formulating a simultaneous equation model to explain wages, output, education, and a worker's quit decision. The model is estimated by maximum likelihood and subjected to a variety of specification tests. Such tests include a comparison of the standard error estimates that form the basis for White's information test, and White's version of a Hausman specification test. Our principal findings are: 1. Individuals that choose more education than we would expect from their observed characteristics have lower than expected quit propensities. We argue that this low quit propensity is one of the unmeasured (and unobserved) attributes that sorting models posit are correlated with education and hence distort the usual estimates of rates of return to education. 2. The performance of non-whites in our sample was no lower than that of whites. However, on their previous jobs non-whites received lower wages than did whites. 3. The output per hour of males in our sample was higher than that of females; however, we were unable to conclude from our data whether these productivity differences could explain the higher wages received by men on their previous jobs. Moreover, this output difference may be transitory and may diminish with on-the-job learning. 4. The expected value of alternative wages had a positive (but not statistically very significant) effect on quit rates. Workers with better alternative opportunities were more likely to quit (all workers had the same opportunities on their current job). 5. Finally we found that workers with high output levels were more likely to quit than were workers with average output levels.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2184.

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Date of creation: Mar 1987
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Publication status: published as Klein, Roger, Richard H. Spady, and Andrew Weiss. "Factors Affecting the Output and Quit Propensities of Production Workers," The Review of Economic Studies, Vol. 58, no. 5 (October 1991), pp. 929-953.
Handle: RePEc:nbr:nberwo:2184

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  1. Viscusi, W Kip, 1980. "Sex Differences in Worker Quitting," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 388-98, August.
  2. Flinn, Christopher J, 1986. "Wages and Job Mobility of Young Workers," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(3), pages S88-S110, June.
  3. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, Econometric Society, vol. 47(1), pages 153-61, January.
  4. Farrell E. Bloch, 1979. "Labor Turnover in U.S. Manufacturing Industries," Journal of Human Resources, University of Wisconsin Press, vol. 14(2), pages 236-246.
  5. Weiss, Andrew, 1984. "Determinants of Quit Behavior," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 2(3), pages 371-87, July.
  6. White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, Econometric Society, vol. 50(1), pages 1-25, January.
  7. Ann P. Bartel, 1982. "Wages, nonwage job characteristics, and labor mobility," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 35(4), pages 578-589, July.
  8. Pencavel, John H, 1972. "Wages, Specific Training, and Labor Turnover in US Manufacturing Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(1), pages 53-64, February.
  9. Mellow, Wesley, 1982. "Employer Size and Wages," The Review of Economics and Statistics, MIT Press, vol. 64(3), pages 495-501, August.
  10. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
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Cited by:
  1. Cunha, Flavio & Heckman, James J. & Lochner, Lance, 2006. "Interpreting the Evidence on Life Cycle Skill Formation," Handbook of the Economics of Education, Elsevier, Elsevier.
  2. Muggeo, Vito M.R. & Ferrara, Giancarlo, 2008. "Fitting generalized linear models with unspecified link function: A P-spline approach," Computational Statistics & Data Analysis, Elsevier, Elsevier, vol. 52(5), pages 2529-2537, January.
  3. Antonio Caparrós Ruiz & Mª. Lucía Navarro Gómez, 2002. "Factors affecting quits and layoffs in Spain," Economic Working Papers at Centro de Estudios Andaluces E2002/16, Centro de Estudios Andaluces.
  4. Gottlieb, Daniel & Moreira, Humberto Ataíde & Araújo, Aloísio Pessoa de, 2004. "A model of mixed signals with applications to countersignaling an the GED," Economics Working Papers (Ensaios Economicos da EPGE) 553, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  5. Sebastian Stolorz, 2005. "A Test of the Signalling Hypothesis - Evidence from Natural Experiment," Labor and Demography, EconWPA 0512008, EconWPA.
  6. Koenker, Roger & Yoon, Jungmo, 2009. "Parametric links for binary choice models: A Fisherian-Bayesian colloquy," Journal of Econometrics, Elsevier, Elsevier, vol. 152(2), pages 120-130, October.
  7. Eduardo de Carvalho Andrade & Luciano I. de Castro, 2008. "Tougher Educational Exam Leading to Worse Selection," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1469, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. James J. Heckman & Jora Stixrud & Sergio Urzua, 2006. "The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 24(3), pages 411-482, July.
  9. Harry J. Holzer, 1988. "The Determinants of Employee Productivity and Earnings: Some New Evidence," NBER Working Papers 2782, National Bureau of Economic Research, Inc.
  10. O'Connell, Michael & Sheikh, Hammad, 2007. "Growth in career earnings and the role of achievement-related traits," Journal of Economic Psychology, Elsevier, Elsevier, vol. 28(5), pages 590-605, October.
  11. Yi-Chun Chen & Siyang Xiong, 2008. "Topologies on Types: Connections," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1470, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. Yona Rubinstein & James J. Heckman, 2001. "The Importance of Noncognitive Skills: Lessons from the GED Testing Program," American Economic Review, American Economic Association, vol. 91(2), pages 145-149, May.
  13. Eduardo Andrade & Luciano De Castro, 2010. "Tougher Educational Exam Leading to Worse Selection," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1533, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  14. de Carvalho Andrade, Eduardo & de Castro, Luciano I., 2011. "Tougher educational exam leading to worse selection," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 5(17), pages 1-24.
  15. O'Connell, Michael & Sheikh, Hammad, 2008. "Achievement-related attitudes and the fate of "at-risk" groups in society," Journal of Economic Psychology, Elsevier, Elsevier, vol. 29(4), pages 508-521, August.
  16. Caparros, A. & Navarro, M.L., 2005. "Factors Affecting Quits and Layoffs in Spanish Labour Market," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 5(4).

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