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Productivity Labour Adjustment Costs. How do new hires and leavers (incl. retirees) compare?

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  • Vincent VANDENBERGHE

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

Labour turnover is a crucial element of contemporary economic life. It can improve productivity if more productive workers replace less productive ones. However, in the short run, it generates sizeable labour adjustment costs (LACs), including productivity losses. This paper sheds new light on the turnover-productivity relationship focusing on productivity LACs. We use firm-level 2014-2022 Belgian data with information on stayers, new hires and leavers: those who are fired, those leaving voluntarily, and those who are about to retire. We use the Hellerstein-Neumark (HN) framework to quantify the productivity of these different labour types, using stayers as a benchmark. We posit that evidence of significant productivity handicaps is a good indicator of productivity LACs. Results suggest no productivity LACs for new hires. By contrast, for leavers, they point to significant ones. What is more, findings for prospective (early) retirees indicate a very sizeable drop in productivity during their last year of employment.

Suggested Citation

  • Vincent VANDENBERGHE, 2025. "Productivity Labour Adjustment Costs. How do new hires and leavers (incl. retirees) compare?," LIDAM Discussion Papers IRES 2025002, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:2025002
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    References listed on IDEAS

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    More about this item

    Keywords

    Labour Turnover; Labour Adjustment Costs; Labour Productivity Differences; Prospective Retirees; Short Horizon;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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