Autori: Waldamann, Robert, Kirman, Alan
Titolo: I quit
Periodico: European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 1992 - Fascicolo: 90 - Pagina iniziale: 1 - Pagina finale: 24

Is the privately optimal quit rate too high or too low? Since quits impose negative externalities on employers due to hiring costs and delays and training costs one might expect the privately optimal quit rate to be higher than socially optimal. In particular one might expect this to be true if laws or social norms rule out contracts in which such externalities are internalized - that is contracts in which workers pay firms damages when they quit or equivalently post bonds when hired. Interestingly, this need not be true since firms' optimal response to this problem is to pay higher than market clearing wages. This causes involuntary unemployment, which in turn means that quits create positive externalities for the unemployed. In particular, if there are match specific non-pecuniary amenities, workers who dislike their jobs and are indifferent between keeping them and quitting may increase average utility if they quit. This paper presents examples in which the privately optimal quit rate is lower than the socially optimal quit rate. Counterintuitively, if workers are allowed to commit to paying damages to firms when they quit, the privately optimal quit rate increases until it equals the socially optimal quit rate. The possibility that privately optimal quit rates are lower than socially optimal, suggests an additional rationale for unemployment insurance not based on risk sharing or redistribution.




Testo completo: http://hdl.handle.net/1814/408

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