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The Returns to Seniority in France (and Why are They Lower than in the United States ?)

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  • Magali Beffy

    (Crest)

  • Moshe Buchinsky

    (Crest)

  • Denis Fougère

    (Crest)

  • Thierry Kamionka

    (Crest)

  • Francis Kramarz

    (Crest)

Abstract

We estimate a model of the joint participation and mobility along with the individuals’wage formation in France. Our model makes it possible to distinguish between unobservedperson heterogeneity and state-dependence. We estimate the model using state of the artbayesian methods employing a long panel (1976-1995) for France. Our results clearly showthat returns to seniority are small, and for some education groups are close to zero. Thespecification here is the same as that used in Buchinsky, Foug`ere, Kramarz and Tchernis(2002), where the returns to seniority were found to be quite large. This result also holdswhen using the method employed by Altonji andWilliams (1992) for both countries. It turnsout that differences between the two countries relate to firm-to-firm mobility. Using a modelof Burdett and Coles (2003), we explain the rationale for this phenomenon. Specifically, ina low-mobility country such as France, there is little gain in compensating workers for longtenures because they tend to stay in the firm for most, if not all, of their career. This is trueeven in cases where individuals clearly posses susbtantial amount of firm-specific humancapital. In contrast, for a high-mobility country such as the United States, high returns toseniority have a clear incentive effect, and firms are induced to pay the premium associatedwith firm-specific human capital to avoid losing their most productive workers.

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Bibliographic Info

Paper provided by Centre de Recherche en Economie et Statistique in its series Working Papers with number 2006-05.

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Length: 53
Date of creation: 2006
Date of revision:
Handle: RePEc:crs:wpaper:2006-05

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  1. 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.
  2. Lee A. Lillard & Robert J. Willis, 1976. "Dynamic Aspects of Earnings Mobility," NBER Working Papers 0150, National Bureau of Economic Research, Inc.
  3. Buchinsky, Moshe & Fougère, Denis & Kramarz, Francis & Tchernis, Rusty, 2005. "Interfirm Mobility, Wages, and the Returns to Seniority and Experience in the U.S," IZA Discussion Papers 1521, Institute for the Study of Labor (IZA).
  4. Ken Burdett & Melvyn Coles, 2003. "Equilibrium Wage-Tenure Contracts," Econometrica, Econometric Society, vol. 71(5), pages 1377-1404, 09.
  5. Flinn, Christopher J, 1986. "Wages and Job Mobility of Young Workers," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S88-S110, June.
  6. 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.
  7. Postel-Vinay & Robin, 2002. "Equilibrium wage dispersion with worker and employer heterogeneity," Working Papers 155908, Institut National de la Recherche Agronomique, France.
  8. Altonji, Joseph G & Shakotko, Robert A, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 437-59, July.
  9. Jovanovic, Boyan, 1984. "Matching, Turnover, and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 108-22, February.
  10. Jolivet, Gregory & Postel-Vinay, Fabien & Robin, Jean-Marc, 2006. "The empirical content of the job search model: Labor mobility and wage distributions in Europe and the US," European Economic Review, Elsevier, vol. 50(4), pages 877-907, May.
  11. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
  12. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-76, February.
  13. Dean R. Hyslop, 1999. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Labor Force Participation of Married Women," Econometrica, Econometric Society, vol. 67(6), pages 1255-1294, November.
  14. Jovanovic, Boyan, 1979. "Firm-specific Capital and Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1246-60, December.
  15. Jacob Mincer, 1974. "Progress in Human Capital Analysis of the Distribution of Earnings," NBER Working Papers 0053, National Bureau of Economic Research, Inc.
  16. Joseph G. Altonji & Nicolas Williams, 1992. "The Effects of Labor Market Experience, Job Seniority, and Job Mobility on Wage Growth," NBER Working Papers 4133, National Bureau of Economic Research, Inc.
  17. Salop, Joanne & Salop, Steven, 1976. "Self-Selection and Turnover in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 619-27, November.
  18. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-20, September.
  19. Miller, Robert A, 1984. "Job Matching and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1086-120, December.
  20. Joseph G. Altonji & Nicolas Williams, 1997. "Do Wages Rise with Job Seniority? A Reassessment," NBER Working Papers 6010, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Olivier Bargain & Karina Doorley, 2014. "Putting Structure on the RD Design: Social Transfers and Youth Inactivity in France," Working Papers halshs-00967329, HAL.
  2. Shintaro Yamaguchi, 2010. "Job Search, Bargaining, and Wage Dynamics," Journal of Labor Economics, University of Chicago Press, vol. 28(3), pages 595-631, 07.
  3. Olivier Bargain & Karina Doorley, 2009. "Caught in the Trap? The Disincentive Effect of Social Assistance," Working Papers 200906, School Of Economics, University College Dublin.
  4. Sabrina Di Addario & Eleonora Patacchini, 2006. "Is there an urban wage premium in Italy?," Temi di discussione (Economic working papers) 570, Bank of Italy, Economic Research and International Relations Area.
  5. G. Sulis, 2009. "Wage Returns to Experience and Tenure for Young Men in Italy," Working Paper CRENoS 200903, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  6. Sabrina Di Addario & Eleonora Patacchini, 2005. "Wages and the City. The Italian case," Economics Series Working Papers 243, University of Oxford, Department of Economics.

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