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Options to Quit

Author

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  • Pfann, Gerard A.

    (Maastricht University)

Abstract

This paper develops a theoretical model of a worker’s decision problem under uncertainty about the optimal separation time, when holding a representative outside offer but facing fixed costs of quitting. Implications of the model’s closed form solution are consistent with the quit behavior of workers from a large Dutch company.

Suggested Citation

  • Pfann, Gerard A., 2000. "Options to Quit," IZA Discussion Papers 197, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp197
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    File URL: https://docs.iza.org/dp197.pdf
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    References listed on IDEAS

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    1. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
    2. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1993. "Long-term earnings losses of high-seniority displaced workers," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 17(Nov), pages 2-20.
    3. Pindyck, Robert S, 1991. "Irreversibility, Uncertainty, and Investment," Journal of Economic Literature, American Economic Association, vol. 29(3), pages 1110-1148, September.
    4. McLaughlin, Kenneth J, 1991. "A Theory of Quits and Layoffs with Efficient Turnover," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 1-29, February.
    5. Gray, Jo Anna, 1978. "On Indexation and Contract Length," Journal of Political Economy, University of Chicago Press, vol. 86(1), pages 1-18, February.
    6. John T. Addison & Pedro Portugal, 1987. "The Effect of Advance Notification of Plant Closings on Unemployment," ILR Review, Cornell University, ILR School, vol. 41(1), pages 3-16, October.
    7. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    8. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-990, October.
    9. Robert McDonald & Daniel Siegel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(4), pages 707-727.
    10. Hall, Robert E & Lazear, Edward P, 1984. "The Excess Sensitivity of Layoffs and Quits to Demand," Journal of Labor Economics, University of Chicago Press, vol. 2(2), pages 233-257, April.
    11. Merton, Robert C., 1976. "Option pricing when underlying stock returns are discontinuous," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 125-144.
    12. Jovanovic, Boyan, 1979. "Firm-specific Capital and Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1246-1260, December.
    13. repec:bla:econom:v:63:y:1996:i:251:p:359-67 is not listed on IDEAS
    14. Sherwin Rosen, 1972. "Learning and Experience in the Labor Market," Journal of Human Resources, University of Wisconsin Press, vol. 7(3), pages 326-342.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Gerard A. Pfann & Daniel S. Hamermesh, 2000. "Two-Sided Learning, Labor Turnover, and Worker Displacement," Working Papers 0021, Harris School of Public Policy Studies, University of Chicago.
    2. Dohmen, Thomas J. & Pfann, Gerard A., 2004. "Worker separations in a nonstationary corporate environment," European Economic Review, Elsevier, vol. 48(3), pages 645-663, June.
    3. Pfann, Gerard A. & Blumberg, Boris F., 2001. "Social Capital and the Uncertainty Reduction of Self-Employment," IZA Discussion Papers 303, Institute of Labor Economics (IZA).
    4. repec:hal:spmain:info:hdl:2441/9938 is not listed on IDEAS
    5. Wossink, Ada & Kuminoff, Nicolai V., 2005. "Valuing the Option to Switch to Organic Farming: An Application to U.S. Corn and Soybeans," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24716, European Association of Agricultural Economists.
    6. Gielen, Anne C. & Tatsiramos, Konstantinos, 2012. "Quit behavior and the role of job protection," Labour Economics, Elsevier, vol. 19(4), pages 624-632.
    7. Gerard A. Pfann & Daniel S. Hamermesh, 2001. "Two-Sided Learning, Labor Turnover and Displacement," NBER Working Papers 8273, National Bureau of Economic Research, Inc.
    8. Pfann Gerard A. & Hamermesh Daniel S., 2008. "Two-Sided Learning with Applications to Labor Turnover and Worker Displacement," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 228(5-6), pages 423-445, October.
    9. repec:spo:wpmain:info:hdl:2441/9938 is not listed on IDEAS
    10. Osorno Del Rosal, Mª P., 2003. "La búsqueda de empleo de los ocupados: intensidad y motivos," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 21, pages 151-174, Abril.
    11. Kuminoff, Nicolai V. & Wossink, Ada, 2005. "Valuing the Option to Convert from Conventional to Organic Farming," 2005 Annual meeting, July 24-27, Providence, RI 19531, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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    More about this item

    Keywords

    voluntary turnover; Job mobility; fixed costs; timing; downsizing;
    All these keywords.

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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