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Quitting Externalities with Uncertainty about Future Productivity

Booth, Alison L and Zoega, Gylfi (1996) Quitting Externalities with Uncertainty about Future Productivity. Working Paper. C.E.P.R. Discussion Papers.

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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.

Item Type: Monograph (Working Paper)
Uncontrolled Keywords: Quitting Externalities; Uncertainty; Under-investment
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 18 Jul 2012 10:34
Last Modified: 18 Jul 2012 10:34

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