Growing Old Together: Firm Survival and Employee Turnover

33 Pages Posted: 23 May 2005

See all articles by Erwan Quintin

Erwan Quintin

Federal Reserve Bank of Dallas

John J. Stevens

Federal Reserve Board - Division of Research and Statistics

Date Written: April 26, 2005

Abstract

Labor market outcomes such as turnover and earnings are correlated with employer characteristics, even after controlling for observable differences in worker characteristics. We argue that this systematic relationship constitutes strong evidence in favor of models where workers choose how much to invest in future productivity. Because employer characteristics are correlated with firm survival, returns to these investments vary across firm types. We describe a dynamic general equilibrium model where workers employed in firms more likely to survive choose to devote more time to productivity enhancing activities, and therefore have a steeper earnings-tenure profile. Our model also predicts that quit rates should be lower in firms more likely to survive, and should tend to fall during slow times, while job destruction rates should rise. These predictions, we argue, are borne out by the existing empirical evidence.

Keywords: Firm survival, firm size, employee turnover, firm

JEL Classification: J24, J31, J63

Suggested Citation

Quintin, Erwan and Stevens, John J., Growing Old Together: Firm Survival and Employee Turnover (April 26, 2005). FEDS Working Paper No. 2005-22, Available at SSRN: https://ssrn.com/abstract=727965 or http://dx.doi.org/10.2139/ssrn.727965

Erwan Quintin (Contact Author)

Federal Reserve Bank of Dallas ( email )

PO Box 655906
Dallas, TX 75265-5906
United States

John J. Stevens

Federal Reserve Board - Division of Research and Statistics ( email )

20th and C Streets, NW
Washington, DC 20551
United States

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