Factors Affecting the Output adn Quit Propensities of Production Workers

We have used a proprietary data set of newly hired semi-skilled production workers at one location of a large unionized firm to investigate several issues in labor economics. This data set is unique in several respects: the workers in our sample faced the same wage schedules, had the same promotional opportunities, the same job tenure (zero), similar working conditions, and had jobs for which we were able to record their physical output. We analyze these data by formulating a simultaneous equation model to explain wages, output, education, and a worker's quit decision. The model is estimated by maximum likelihood and subjected to a variety of specification tests. Such tests include a comparison of the standard error estimates that form the basis for White's information test, and White's version of a Hausman specification test. Our principal findings are: 1. Individuals that choose more education than we would expect from their observed characteristics have lower than expected quit propensities. We argue that this low quit propensity is one of the unmeasured (and unobserved) attributes that sorting models posit are correlated with education and hence distort the usual estimates of r