Options to Quit
This paper develops a theoretical model of optimal quit behaviour for a worker who holds an option to quit but faces a fixed cost of quitting. A worker will accept the outside offer only if the net present value of the difference in expected future cash flows associated with the old and the new job exceeds the costs of quitting plus the value of keeping the option to quit open. The implications of the model are consistent with some empirical facts of quit behaviour that we observe in manufacturing data in the US and in plant level data in The Netherlands.
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|Date of creation:||Sep 2000|
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- Robert E. Hall & Edward P. Lazear, 1982.
"The Excess Sensitivity of Layoffs and Quits to Demand,"
NBER Working Papers
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787-75., Massachusetts Institute of Technology (MIT), Sloan School of Management.
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92-11, W.E. Upjohn Institute for Employment Research.
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- John T. Addison & Pedro Portugal, 1987. "The Effect of Advance Notification of Plant Closings on Unemployment," ILR Review, Cornell University, ILR School, vol. 41(1), pages 3-16, October.
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- Gray, Jo Anna, 1978. "On Indexation and Contract Length," Journal of Political Economy, University of Chicago Press, vol. 86(1), pages 1-18, February.
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