Do Environmental Shocks and Budgetary Constraints on Public Organizations Increase Employee Turnover?

Abstract

Previous public management and organizational theory literature focuses primarily on the employee- and organizational-level characteristics that influence employee turnover. However, other potential determinants of employee turnover, such as factors external to the organization, are understudied. the current paper addresses this gap in the literature by examining the effect of the interaction between environmental shocks and budgetary constraints on employee turnover. Using a nationally representative teacher-level dataset, this paper tests the hypothesis that, after the passage of the No Child Left Behind Act (NCLB), teachers in states with binding tax and expenditure limitations (TELs) on school districts become more likely to turnover than their counterparts in other states. This paper finds evidence to support this hypothesis. Following the passage of NCLB, a teacher in a state with a binding TEL is 8.7 percentage points more likely to leave the teaching profession relative to all other teachers. This result is primarily driven by those teachers in states without a prior school accountability policy. Overall, this study adds to prior research on public employee turnover, TELs, and school accountability.