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Worker Flows, Reallocation Dynamics, and Firm Productivity: New Evidence from Longitudinal Matched Employer-Employee Data

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  • Elena Grinza

    (Department of Management and Production Engineering, Politecnico di Torino, Italy)

Abstract

This paper investigates the impact of a firm's worker flows on productivity by using unique longitudinal matched employer-employee data. The analysis splits the firm's total worker flows into three components: workers' replacements (excess worker flows), hirings meant to increase the firm's employment level (net hirings), and separations of workers intended to decrease the firm's workforce (net separations). This allows isolating the impact of workers' replacements, which represent the most prominent (and compelling) feature of worker mobility. Endogeneity is dealt with by using a modified version of the Ackerberg et al.'s (2015) control function method, which explicitly accounts for firm fixed effects. The main finding is that excess flows foster productivity, and so do net hirings, while net separations hurt it. The effect of excess flows is heterogeneous and varies widely based on the types of replacements, the categories of workers involved, and the types of firms experiencing such flows. Overall, the findings of this paper highlight the importance of reallocation dynamics to reach better employer-employee matches and call for a reconsideration of policies concerning the flexibility of the labor market.

Suggested Citation

  • Elena Grinza, 2020. "Worker Flows, Reallocation Dynamics, and Firm Productivity: New Evidence from Longitudinal Matched Employer-Employee Data," Working papers 065, Department of Economics, Social Studies, Applied Mathematics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    • Handle: RePEc:tur:wpapnw:065
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    Cited by:

    1. Francesco Devicienti & Elena Grinza & Alessandro Manello & Davide Vannoni, 2025. "Employer cooperation, productivity and wages: new evidence from inter‐firm formal network agreements," Economica, London School of Economics and Political Science, vol. 92(365), pages 1-41, January.
    2. Gagliardi, Nicola & Grinza, Elena & Rycx, François, 2021. "Can You Teach an Old Dog New Tricks? New Evidence on the Impact of Tenure on Productivity," GLO Discussion Paper Series 852, Global Labor Organization (GLO).
    3. Emma Lappi, 2024. "New hires, adjustment costs, and knowledge transfer—evidence from the mobility of entrepreneurs and skills on firm productivity," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 33(3), pages 712-737.
    4. Nicola Gagliardi & Elena Grinza & François Rycx, 2023. "Workers’ tenure and firm productivity: New evidence from matched employer‐employee panel data," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 62(1), pages 3-33, January.

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    More about this item

    Keywords

    Worker flows; excess worker flows; firm productivity; semi-parametric estimation of production functions; longitudinal matched employer-employee data.;
    All these keywords.

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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