Optimal employee turnover rate: theory and evidence
Citations
Altmetric
Author
HARRIS, MARK; Tang, Kam-Ki; TSENG, YI-PINGDate
2002-10Affiliation
Economics and Commerce: Melbourne Institute of Applied Economic and Social ResearchMetadata
Show full item recordDocument Type
PreprintCitations
Harris, Mark and Tang, Kam-Ki and Tseng, Yi-Ping (2002) Optimal employee turnover rate: theory and evidence.Access Status
Open AccessDescription
ISBN 0734015437 ISSN 13284991 (Print) ; ISSN 14475863 (Online) MIWP no. 19/02
Abstract
This paper investigates the quantitative effects of employee turnover on firms' productivity.The Australian Business Longitudinal Survey 1995-98, a unique survey providing firm level data on both production and employee turnover, is used as the data source. Theoretical studies have advocated that firm specific human capital and job matching to be the two major, but competing, mechanisms through which turnover affects productivity. Our results indicate that the effect of job matching dominates when turnover is"low," while the effect of firm specific human capital dominates when turnover is"high." We identify that the optimal turnover rate - the rate that maximises productivity, controlling for other factors - is about 0.3, well in excess of the sample mean. The finding suggests that further increasing the flexibility of employment arrangement for small and medium Australian enterprises could yield substantial productivity gains.
Keywords
employee turnover; productivity; firm specific human capital; job matching; panel data; unobserved effects; instrumental variable estimationExport Reference in RIS Format
Endnote
- Click on "Export Reference in RIS Format" and choose "open with... Endnote".
Refworks
- Click on "Export Reference in RIS Format". Login to Refworks, go to References => Import References