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Two-Sided Learning, Labor Turnover and Worker Displacement

  • Pfann, Gerard A.

    ()

    (Maastricht University)

  • Hamermesh, Daniel S.

    ()

    (University of Texas at Austin, Royal Holloway)

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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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 308.

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Length: 46 pages
Date of creation: Jun 2001
Date of revision:
Publication status: published as 'Two-Sided Learning with Applications to Labor Turnover and Worker Displacement' in: Jahrbücher für Nationalökonomie und Statistik, 2008, 228 (5-6), 423 - 445
Handle: RePEc:iza:izadps:dp308
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  1. 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.
  2. 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.
  3. Louis S. Jacobson & Robert J. LaLonde & Daniel Sullivan, 1992. "Earnings Losses of Displaced Workers," Upjohn Working Papers and Journal Articles 92-11, W.E. Upjohn Institute for Employment Research.
  4. Joseph G. Altonji & Charles R. Pierret, . "Employer Learning and Statistical Discrimination," IPR working papers 97-18, Institute for Policy Resarch at Northwestern University.
  5. Radner, Roy, 1981. "Monitoring Cooperative Agreements in a Repeated Principal-Agent Relationship," Econometrica, Econometric Society, vol. 49(5), pages 1127-48, September.
  6. Pfann, Gerard Antonie, 2000. "Options to Quit," CEPR Discussion Papers 2563, C.E.P.R. Discussion Papers.
  7. Hamermesh, Daniel S, 1987. "The Costs of Worker Displacement," The Quarterly Journal of Economics, MIT Press, vol. 102(1), pages 51-75, February.
  8. 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.
  9. 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.
  10. 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.
  11. James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998. "Characterizing Selection Bias Using Experimental Data," Econometrica, Econometric Society, vol. 66(5), pages 1017-1098, September.
  12. 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.
  13. 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.
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