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Two-Sided Learning, Labor Turnover and Displacement

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  • Gerard A. Pfann
  • Daniel S. Hamermesh

Abstract

We construct a general dynamic structural model of two-sided learning between a firm and its workers. We estimate an empirical version of the model using personnel data from Fokker Aircraft that cover the path of layoffs and quits through its bankruptcy. We find that the firm learns about its workers' loyalty (demonstrating the role of information in repeated cooperative principal-agent relationships). There is no evidence that workers learn (consistent with earlier empirical results on American workers). The type of data that we use also generates information on the value of learning and on whether and how the characteristics of workers who remain until the firm's death differ from those of all affected workers. It thus allows us to measure the increases in the firm's value from learning about its workers' behavior and to infer the extent of biases in estimated losses from displacement from samples restricted to displaced workers.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8273.

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Date of creation: May 2001
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Publication status: published as Pfann, Gerard A. and Daniel S. Hamermesh. “Two-Sided Learning, with Applications to Labor Turnover and Worker Displacement.” Jahrbücher für Nationalökonomie und Statistik (December 2008).
Handle: RePEc:nbr:nberwo:8273

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References

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  1. Felli, Leonardo & Harris, Christopher, 1996. "Learning, Wage Dynamics, and Firm-Specific Human Capital," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 838-68, August.
  2. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
  3. James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998. "Characterizing Selection Bias Using Experimental Data," NBER Working Papers 6699, National Bureau of Economic Research, Inc.
  4. Pfann, Gerard Antonie, 2000. "Options to Quit," CEPR Discussion Papers 2563, C.E.P.R. Discussion Papers.
  5. McLaughlin, Kenneth J, 1991. "A Theory of Quits and Layoffs with Efficient Turnover," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 1-29, February.
  6. Bruce C. Fallick, 1996. "A review of the recent empirical literature on displaced workers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 50(1), pages 5-16, October.
  7. Robert H. Topel & Michael P. Ward, 1988. "Job Mobility and the Careers of Young Men," NBER Working Papers 2649, National Bureau of Economic Research, Inc.
  8. Joseph G. Altonji & Charles R. Pierret, . "Employer Learning and Statistical Discrimination," IPR working papers 97-18, Institute for Policy Resarch at Northwestern University.
  9. Stiglitz, Joseph E & Weiss, Andrew, 1983. "Incentive Effects of Terminations: Applications to the Credit and Labor Markets," American Economic Review, American Economic Association, vol. 73(5), pages 912-27, December.
  10. Hamermesh, Daniel S, 1987. "The Costs of Worker Displacement," The Quarterly Journal of Economics, MIT Press, vol. 102(1), pages 51-75, February.
  11. Francine D. Blau & Larry M. Kahn, 1981. "Race and sex differences in quits by young workers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 34(4), pages 563-577, July.
  12. Kiefer, Nicholas M & Neumann, George R, 1979. "An Empirical Job-Search Model, with a Test of the Constant Reservation-Wage Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 89-107, February.
  13. Radner, Roy, 1981. "Monitoring Cooperative Agreements in a Repeated Principal-Agent Relationship," Econometrica, Econometric Society, vol. 49(5), pages 1127-48, September.
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Cited by:
  1. Josef Fersterer & Jörn-Steffen Pischke, 2008. "Returns to Apprenticeship Training in Austria: Evidence from Failed Firms," CEE Discussion Papers 0088, Centre for the Economics of Education, LSE.
  2. Nykvist, Jenny, 2008. "The Effects of Displacement on Self-employment Survival," Working Paper Series 764, Research Institute of Industrial Economics.
  3. Josef Fersterer & Jörn-Steffen Pischke & Rudolf Winter-Ebmer, 2008. "Returns to apprenticeship training in Austria: evidence from failed firms," LSE Research Online Documents on Economics 23550, London School of Economics and Political Science, LSE Library.
  4. Kenneth A. Counch, 2003. "Job Matching and Wage Growth in the U.S. and Germany," Working papers 2003-10, University of Connecticut, Department of Economics.
  5. Hamermesh, Daniel, 2008. "Fun with matched firm-employee data: Progress and road maps," Labour Economics, Elsevier, vol. 15(4), pages 662-672, August.
  6. von Greiff, Jenny, 2009. "Displacement and self-employment entry," Labour Economics, Elsevier, vol. 16(5), pages 556-565, October.

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