Repeated job quits: stepping stones or learning about quality?

an article by Anne C Gielen (Erasmus University Rotterdam, the Netherlands and IZA) published in IZA Journal of European Labor Studies Volume 2 Number 7

Abstract

Increasing labour mobility is high on the political agenda because of its supposedly positive effects on labour market functioning. However, little attention has been paid to information imperfections, and to what extent they limit potential efficiency gains of labour mobility. When the quality of a new job offer is known ex ante, job quits serve as a stepping stone to better jobs. Yet, if job quality is only observed ex post, job quits may lead to worse matches.

This paper argues that actual job quit behaviour is characterised by a mixture of both, and investigates the relative empirical content of both extremes in quit decisions. A variance decomposition shows that for nearly 70% of job quits job quality was observed ex-ante; the remaining 30% was learned ex post. Hence, stimulating job mobility mostly improves labour market outcomes, though governments may aim to further reduce information imperfections in order to maximise the efficacy of labour policies.

Full text (HTML) [High level statistics, or that’s what it looked like to me. I did O-level a long time ago.]

JEL classification: J28, J62

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