Working Paper

Raising the bar for models of turnover

Abstract: It is well known that turnover rates fall with employee tenure and employer size. We document a new empirical fact about turnover: Among surviving employers, separation rates are positively related to industry-level exit rates, even after controlling for tenure and size. Specifically, in a dataset with over 13 million matched employee-employer observations for France, we find that, all else equal, a 1 percentage point increase in exit rates raises separation rates by 1/2 percentage point on average. Among current year hires, the average effect is twice as large. This relationship between exit rates and separation rates is robust to a host of data and statistical considerations. We review several standard models of worker turnover and argue that a model with firm-specific human capital accumulation most easily accounts for this new empirical fact.

Keywords: Labor turnover; Human capital; Econometric models;

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2005

Number: 2005-23