Repeated job quits : stepping stones or learning about quality?

Increasing labor mobility is high on the political agenda because of its supposedly positive effects on labor market functioning. However, little attention has been paid to information imperfections, and to what extent they limit potential efficiency gains of labor mobility. When the quality of a new job offer is known ex ante, job quits serve as a stepping stone to better jobs. Yet, if job quality is only observed ex post, job quits may lead to worse matches. This paper argues that actual job quit behavior is characterized by a mixture of both, and investigates the relative empirical content of both extremes in quit decisions. A variance decomposition shows that for nearly 70% of job quits job quality was observed ex-ante; the remaining 30% was learned ex post. Hence, stimulating job mobility mostly improves labor market outcomes, though governments may aim to further reduce information imperfections in order to maximize the efficacy of labor policies.