Options to Quit

Gerard Pfann

No 2563, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper develops a theoretical model of optimal quit behaviour for a worker who holds an option to quit but faces a fixed cost of quitting. A worker will accept the outside offer only if the net present value of the difference in expected future cash flows associated with the old and the new job exceeds the costs of quitting plus the value of keeping the option to quit open. The implications of the model are consistent with some empirical facts of quit behaviour that we observe in manufacturing data in the US and in plant level data in The Netherlands.

Keywords: Job mobility; Fixed costs; Timing; Downsizing; Voluntary turnover (search for similar items in EconPapers)
JEL-codes: J63 (search for similar items in EconPapers)
Date: 2000-09
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Journal Article: Options to quit (2001)
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