Academic Commons

Reports

Turnover reflects specific training better than wages do

Munasinghe, Lalith; O'Flaherty, Brendan Andrew

Turnover falls with tenure - this is one of the best established empirical regularities of labor economics - but finding a tenure effect on wages seems to be very hard. Within-job wage cuts do not seem very uncommon either. We reconcile these findings by revisiting an old question: how gains from firm specific training are split between workers and firms. The division is determined by a stationary distribution of outside offers. The model is ex post monopsony: the lower a wage a firm pays to a specifically trained worker, the more profit it makes and the more eager it is to have her stay, but the more likely she is to leave. The optimal time paths of wages and turnover probabilities show that even if marginal product is increasing, wages need not be increasing; but rising marginal product always implies a falling turnover rate.

Files

More About This Work

Academic Units
Economics
Publisher
Department of Economics, Columbia University
Series
Department of Economics Discussion Papers, 0102-18
Published Here
March 22, 2011

Notes

March 2002

Academic Commons provides global access to research and scholarship produced at Columbia University, Barnard College, Teachers College, Union Theological Seminary and Jewish Theological Seminary. Academic Commons is managed by the Columbia University Libraries.