The more intra-firm equity, the higher employee retention: Evidence from the universo of urban firms in Colombia

Abstract

Fairness and equity considerations may influence workers’ decision to stay or quit their jobs. This paper tests several hypotheses derived from theory on the relation between intra-firm equity and employee retention. It uses administrative data covering the universe of urban firms in Colombia between 2008 and 2016. The average wage of the firm, the intra-firm dispersion of real wage adjustments, and the share of women in the firm are significantly associated with retention rates in the directions predicted by theory. The intra-firm wage gap is directly associated with retention, at odds with theory. The results suggest that equity considerations are important in employees’ decision to stay or quit.