The determinants and implications of worker turnover in a nascent industry

In this paper we analyse the determinants of turnover in the Ethiopian garment industry. We find suggestive evidence that turnover is costly for both workers and firms. To increase turnover we conduct a pilot field experiment. We compare the effect of a retention bonus schemes and an unconditional bonus payment on worker retention. Surprisingly, we find no statistically significant difference in three months retention rates between the two bonus schemes. Comparing the experimental cohorts to previous cohorts, we find strong differences in retention rates. This suggests that low wage levels might be the main reason for high turnover. We use these findings to design a field experiment that will allow us to characterise the welfare implications of turnover.