Within-Firm Seniority Structure and Firm Performance

In this article, we examine the relation between hiring and separations, as measured by the within-firm seniority structure and the turnover rate decomposed by job spell durations of the movers, and firm-level performance, as measured by productivity and profitability, or input and skill structure. Our findings show that high turnover rates tend to decrease firm productivity but increase firm profitability for movers with short job spell durations. We also find evidence that firms have separated from their older workers and either replaced them with capital or with younger workers in smaller numbers. These results are related to different models of the labor market. All of these models possess some features that are consistent with these findings.