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Wages, experience and seniority

Author

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  • Christian Dustmann

    (Institute for Fiscal Studies and University College London)

  • Costas Meghir

    (Institute for Fiscal Studies and Yale University)

Abstract

In this paper we study the sources of wage growth. We identify the contribution to such growth of general, sector specific and firm specific human capital. Our results are interpretable within the context of a model where the returns to human capital may be heterogeneous and where firms may offer different combinations of entry level wages and firm specific human capital development. We allow for the the possibility that wages are match specific and that workers move jobs as a result of identifying a better match. To estimate the average returns to experience, sector tenure and firm specific tenure within this context, we develop an identification strategy which relies on the use of establishment closures. Our data source is a new and unique administrative data set for Germany that includes complete work histories as well as individual characteristics. We find positive returns to experience and tenure for skilled workers. The returns to experience and tenure for unskilled workers are substantially lower. Figure. Within and between firm and sector wage growth, by experience Figure. Within and between firm and sector wage growth, by experience

Suggested Citation

  • Christian Dustmann & Costas Meghir, 2001. "Wages, experience and seniority," IFS Working Papers W01/01, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:01/01
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    Keywords

    Training; labour market; wages;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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