Australia has a dynamic labour market with high job turnover. According to the HILDA Survey data, about one-fifth of all employees separate from their job every year, and about one fifth of those are displaced workers - laid off for economic reasons. Using multivariate probit regression we find...

Many firms adjust employment in a "lumpy" manner -- infrequently and in large bursts. In this paper, I show that lumpy adjustments can arise from concerns about the incentives of remaining workers. Specifically, I develop a model in which a firm's productivity depends on its workers' effort and...