Citation

Discussion Paper Details

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Title: Quitting Externalities with Uncertainty about Future Productivity

Author(s): Alison L Booth and Gylfi Zoega

Publication Date: March 1996

Keyword(s): Quitting Externalities, Uncertainty and Under-investment

Programme Area(s): Human Resources

Abstract: This paper looks at the effect of quitting on the number of workers trained under conditions of uncertainty about future productivity when workers have both firm-specific and industry-specific skills. A new effect is found which works in the opposite direction to the undertraining result of Stevens (1994, 1995): A high quit rate makes investment in training less irreversible in the presence of firing costs and hence also less risky. This effect makes firms start hiring new workers at a lower level of productivity and hire more workers for a given increase in productivity. A rise in the quit rate can now either decrease or increase the number of trained workers.

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Bibliographic Reference

Booth, A and Zoega, G. 1996. 'Quitting Externalities with Uncertainty about Future Productivity'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1360