Information Frictions and Teacher Turnover

Many decentralized matching markets experience high rates of instability due to information frictions. This paper analyzes these frictions in a particularly unstable U.S. market, the labor market for first-year school teachers. We develop and estimate a dynamic, partial equilibrium model of labor mobility that incorporates non-pecuniary information frictions for school climate and teacher workload. In terms of reducing turnover, a policy that improves information outperforms each alternative considered, including targeted wage premiums at hard-to-staff schools, large retention bonuses, and relaxed tenure requirements. Replicating the gains made through information revelation requires retention bonuses valued at 35% of teachers’ current salaries.