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BPEA Article

Job Switching and Job Satisfaction in the U.S. Labor Market

Andrew K. Rose, George A. Akerlof, and Janet L. Yellen


SUCCESSFUL MACROECONOMIC THEORIES must explain important empirical regularities. One indisputable regularity is the highly procyclic nature of quits: many more people voluntarily leave their jobs when unemployment is low than when it is high. In this paper, we demonstrate that theories based on the assumption that unemployment is involuntary can easily explain procyclic quits. We construct and empirically validate a simple model of labor turnover; the model is Keynesian in that the labor market is nonclearing: jobs are rationed. Market-clearing theories such as search theory and real business cycle theory cannot account for the procyclic behavior of quits.