Title

Distortions and policies when labor turnover is costly.

SelectedWorks Author Profiles:

Thomas J. Carter

Document Type

Article

Publication Date

1993

ISSN

0932-4569

Abstract

This paper uses a turnover model of efficiency wages that explicitly considers the microfoundations of the worker's choice to stay or quit. Here, there are two distortions. Employment and productivity are both too low to be optimal. Productivity is too low because turnover is too high. With a government budget constraint, policies that alleviate one distortion must aggravate the other. The results show that increasing productivity improves welfare even though it also leads to greater unemployment. Policies that increase productivity are wage- rate subsidies, hiring taxes, and minimum wage laws.

Comments

Citation only. Full-text article is available through licensed access provided by the publisher. Members of the USF System may access the full-text of the article through the authenticated link provided.

Publisher

Mohr Siebeck GmbH & Co. KG

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.