Growing Old Together: Firm Survival and Employee Turnover

We describe a competitive model of worker turnover and labor earnings that is consistent with features of labor markets often used to motivate non-competitive models. In our model, as in the data, observationally identical workers earn different wages in different firms and industries. This is because workers employed in firms more likely to survive devote more time to human capital accumulation, and therefore have steeper seniority profiles. Our model also correctly predicts that quit rates should be lower in firms more likely to survive, and should tend to fall during slow times, while job destruction rates should rise.