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Earnings-Tenure Profiles: Tests of Agency and Human Capital Theories using Individual Performance Data

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Author Info
Dong, Xia-Yuan () (University of Winnipeg)
Jones, Derek C. () (Hamilton College)
Kato, Takao () (Department of Economics, Colgate University)

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Abstract

By using a large new panel of individual data, including objective measures of worker performance, we provide some of the most rigorous evidence to date on several related dimensions of enduring debates surrounding upward-sloping earnings-tenure profiles. Most importantly we provide the first direct test of the relative validity of human capital and agency explanations in accounting for upward-sloping earnings-tenure profiles; our findings strongly support the agency view. Our second area of interest concerns employee ownership (many workers at our case are employee owners.) Consistent with agency theory we find that earnings-tenure profiles for employee owners are not upward-sloping but horizontal. In addition we find that pay-performance sensitivities are substantially weaker for employee owners than for other workers. Finally we investigate the impact of residential policies in China. We find that again consistent with the agency view, earnings-tenure profiles are considerably steeper for urban workers than for migrant workers with far more limited alternative employment opportunities.

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Publisher Info
Paper provided by Department of Economics, Colgate University in its series Working Papers with number 104-26.

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Length: 30 pages
Date of creation: 12 Aug 2007
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Handle: RePEc:cgt:wpaper:104-26

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Related research
Keywords: Earnings; Tenure; Seniority; Performance; Human Capital; Agency; Employee Ownership;

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Find related papers by JEL classification:
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
M5 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics
L6 - Industrial Organization - - Industry Studies: Manufacturing

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    Other versions:
  3. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December. [Downloadable!] (restricted)
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  14. Sue Fernie & David Metcalf, 1999. "It's Not What You Pay it's the Way that You Pay it and that's What Gets Results: Jockeys' Pay and Performance," LABOUR, CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd, vol. 13(2), pages 385-411, 06. [Downloadable!] (restricted)
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  17. Lazear, Edward P & Moore, Robert L, 1984. "Incentives, Productivity, and Labor Contracts," The Quarterly Journal of Economics, MIT Press, vol. 99(2), pages 275-96, May. [Downloadable!] (restricted)
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