Answers are grounded in this paper and cite their sources.
This article shows that contracts which make workers' wages depend on their seniority level as well as their length of service can induce optimal turnover in the presence of transactions costs and investments in specific capital. Other arrangements which are shown to be inferior include Becker's standard sharing contract and contracts which embody explicit separation penalties. The optimal wage profile is derived and it corresponds to those we observe.
No takes yet. Share an insight, caveat, or question.
Lorne Carmichael (1983) studied this question.
Synapse has enriched 10 related papers. Consider them for comparative context: