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Individual Wage Growth: The Role of Industry Experience

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  • Michele Battisti

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Abstract

This paper focuses on the effect of experience within an industry on wages. I use a correlated random effects simultaneous equation model that allows individual and match heterogeneity to affect wages, job tenure and industry experience. I estimate my model separately for men and women using a large panel of young Italian workers for the years 1986–2004. Results show that wage returns to industry experience are much higher than wage returns to job seniority. The hypotheses of exogeneity of job seniority and industry experience in the wage equation are rejected: high-wage workers and highwage matches last longer.

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Bibliographic Info

Paper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Paper No. 152.

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Date of creation: 2013
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Handle: RePEc:ces:ifowps:_152

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Keywords: Wage growth and industry experience; firm tenure; simultaneous equation models; random effects; Worker History Italian Panel (WHIP) dataset;

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  1. Thomas Cornelißen & Olaf Hübler, 2011. "Unobserved Individual and Firm Heterogeneity in Wage and Job‐Duration Functions: Evidence from German Linked Employer–Employee Data," German Economic Review, Verein für Socialpolitik, vol. 12(4), pages 469-489, November.
  2. Joseph Altonji & Anthony Smith & Ivan Vidangos, 2009. "Modeling earnings dynamics," Finance and Economics Discussion Series 2009-08, Board of Governors of the Federal Reserve System (U.S.).
  3. Michael Peters, 2010. "Noncontractible Heterogeneity in Directed Search," Econometrica, Econometric Society, vol. 78(4), pages 1173-1200, 07.
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  5. Pissarides, Christopher A, 1994. "Search Unemployment with On-the-Job Search," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 457-75, July.
  6. Joseph Altonji & R. Shakotko, 1985. "Do Wages Rise with Job Seniority?," Working Papers 567, Princeton University, Department of Economics, Industrial Relations Section..
  7. Joseph G. Altonji & Nicolas Williams, 1997. "Do Wages Rise with Job Seniority? A Reassessment," NBER Working Papers 6010, National Bureau of Economic Research, Inc.
  8. Abowd, J.M. & Kramarz, F. & Margolis, D.N., 1995. "High-Wage Workers and High-Wage Firms," Cahiers de recherche 9503, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  9. Benoit Dostie, 2004. "Job Turnover and the Returns to Seniority," Econometric Society 2004 North American Winter Meetings 127, Econometric Society.
  10. Abraham, Katharine G & Farber, Henry S, 1987. "Job Duration, Seniority, and Earnings," American Economic Review, American Economic Association, vol. 77(3), pages 278-97, June.
  11. Martin Schindler, 2009. "The Italian Labor Market," IMF Working Papers 09/47, International Monetary Fund.
  12. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 646-79, June.
  13. Ronni Pavan, 2011. "Career Choice and Wage Growth," Journal of Labor Economics, University of Chicago Press, vol. 29(3), pages 549 - 587.
  14. Cingano, Federico, 2003. "Returns to specific skills in industrial districts," Labour Economics, Elsevier, vol. 10(2), pages 149-164, April.
  15. Simon D. Woodcock, 2007. "Wage Differentials in the Presence of Unobserved Worker, Firm, and Match Heterogeneity," Discussion Papers dp07-10, Department of Economics, Simon Fraser University.
  16. Jovanovic, Boyan, 1984. "Matching, Turnover, and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 108-22, February.
  17. Topel, Robert H & Ward, Michael P, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 439-79, May.
  18. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
  19. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Econometrica, Econometric Society, vol. 70(6), pages 2295-2350, November.
  20. Roberto Leombruni & Roberto Quaranta, 2011. "La codifica di settore in WHIP. Problemi correnti e studio di un algoritmo di ricostruzione della codifica Ateco 2002," LABORatorio R. Revelli Whip Technical Reports 02, LABORatorio R. Revelli, Centre for Employment Studies.
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