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Returns to type or tenure?

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  • Roland A. Amann
  • Tobias J. Klein

Abstract

A regression of wages on firm tenure is likely to yield biased estimates of the returns to tenure because tenure and wages are confounded by unobserved attributes of the job and the unobserved quality of the match between the firm and the employee. Previously, the within-job variation in tenure has been used as an instrument to estimate the average returns to tenure. In this paper, we propose to use instead an easy-to-implement control function estimator for the returns to tenure and their dependence on unobserved heterogeneity. The obtained results for Germany indicate that there is a substantial amount of unobserved heterogeneity in the returns to tenure and that good job matches are characterized by higher returns to tenure in the first five years and lower returns thereafter.

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File URL: http://hdl.handle.net/10.1111/j.1467-985X.2011.00692.x
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Bibliographic Info

Article provided by Royal Statistical Society in its journal Journal of the Royal Statistical Society: Series A (Statistics in Society).

Volume (Year): 175 (2012)
Issue (Month): 1 (01)
Pages: 153-166

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Handle: RePEc:bla:jorssa:v:175:y:2012:i:1:p:153-166

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References

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Cited by:
  1. Hospido, Laura, 2010. "Job Changes and Individual-Job Specific Wage Dynamics," IZA Discussion Papers 5088, Institute for the Study of Labor (IZA).
  2. Robert Orlowski & Regina T. Riphahn, 2007. "Seniority in Germany: New Evidence on Returns to Tenure for Male Full-time Workers," Working Papers 036, Bavarian Graduate Program in Economics (BGPE).
  3. repec:iab:iabzaf:v:41:i:2/3:p:139-155 is not listed on IDEAS

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