A Time Series Analysis of Labor Turnover.

In the research underlying this paper an attempt was made to estimate the displacements and unreplaced attritions that must be expected to occur as a result of exogenous reductions in the demand for an industry's output. Such reductions may be caused by many factors, including trade liberalization measures and the ensuing increase in import penetration, the effects of which are of particular interest in the present context. This paper provides the theoretical framework of the analysis, a description of the time series data, and the result of the construction, estimation, and simulation of the model. The main conclusion is that unreplaced attritions may not be as important in bringing about net reductions in employment as is sometimes suggested. Although firms cut their new hires drastically when demand falls, this is largely caused and offset by substantial reductions in voluntary quits. In other words, since attritions fall with demand conditions, attempts by firms to effect net reductions in employment through unreplaced attritions tend to have only limited success and the primary method of reducing employment takes the form of displacements.