Our analysis of matched employee-employer data from Estonian firms (years 2006–2013) shows that an increase in labor churning is related to a positive change in labor productivity during an economic crisis.
During boom years, churning is related to a negative change in labor productivity. Only in services during the crisis did foreign firms have a stronger positive relationship between labor churning and labor
productivity changes than domestic firms. However, our analysis at the individual level does not confirm that, during a crisis, foreign firms in services hire more employees with characteristics that have been
found to be related to productivity increases.