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

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Author Info

  • Beffy, Magali

    ()
    (CREST-INSEE)

  • Buchinsky, Moshe

    ()
    (University of California, Los Angeles)

  • Fougère, Denis

    ()
    (CREST)

  • Kamionka, Thierry

    ()
    (CREST-INSEE)

  • Kramarz, Francis

    ()
    (CREST (ENSAE))

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 unobserved person heterogeneity and state-dependence. We estimate the model using state of the art bayesian methods employing a long panel (1976-1995) for France. Our results clearly show that returns to seniority are small, and for some education groups are close to zero. The specification here is the same as that used in Buchinsky, Fougère, Kramarz and Tchernis (2002), where the returns to seniority were found to be quite large. This result also holds when using the method employed by Altonji and Williams (1992) for both countries. It turns out that differences between the two countries relate to firm-to-firm mobility. Using a model of Burdett and Coles (2003), we explain the rationale for this phenomenon. Specifically, in a low-mobility country such as France, there is little gain in compensating workers for long tenures because they tend to stay in the firm for most, if not all, of their career. This is true even in cases where individuals clearly possess substantial amount of firm-specific human capital. In contrast, for a high-mobility country such as the United States, high returns to seniority have a clear incentive effect, and firms are induced to pay the premium associated with firm-specific human capital to avoid losing their most productive workers.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1935.

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Length: 53 pages
Date of creation: Jan 2006
Date of revision:
Handle: RePEc:iza:izadps:dp1935

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Related research

Keywords: participation; wage; job mobility; returns to seniority; returns to experience; individual effects;

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References

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  1. Joseph Altonji & R. Shakotko, 1985. "Do Wages Rise with Job Seniority?," Working Papers 567, Princeton University, Department of Economics, Industrial Relations Section..
  2. 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.
  3. Abowd, J.M. & Kramarz, F. & Margolis, D.N., 1995. "High-Wage Workers and High-Wage Firms," Cahiers de recherche 9503, Universite de Montreal, Departement de sciences economiques.
  4. Postel-Vinay & Robin, 2002. "Equilibrium wage dispersion with worker and employer heterogeneity," Working Papers 155908, Institut National de la Recherche Agronomique, France.
  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. Miller, Robert A, 1984. "Job Matching and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1086-120, December.
  7. 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).
  8. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-20, September.
  9. 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.
  10. Robert H. Topel, 1990. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," NBER Working Papers 3294, National Bureau of Economic Research, Inc.
  11. Joseph G. Altonji & Nicolas Williams, 2005. "Do wages rise with job seniority? A reassessment," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 58(3), pages 370-397, April.
  12. 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.
  13. 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.
  14. 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.
  15. Lee A. Lillard & Robert J. Willis, 1976. "Dynamic Aspects of Earnings Mobility," NBER Working Papers 0150, National Bureau of Economic Research, Inc.
  16. Jovanovic, Boyan, 1979. "Firm-specific Capital and Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1246-60, December.
  17. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
  18. Jacob Mincer, 1974. "Progress in Human Capital Analysis of the Distribution of Earnings," NBER Working Papers 0053, National Bureau of Economic Research, Inc.
  19. Jovanovic, Boyan, 1984. "Matching, Turnover, and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 108-22, February.
  20. Ken Burdett & Melvyn Coles, 2003. "Equilibrium Wage-Tenure Contracts," Econometrica, Econometric Society, vol. 71(5), pages 1377-1404, 09.
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Citations

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Cited by:
  1. 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.
  2. Bargain, Olivier & Doorley, Karina, 2009. "Caught in the Trap? The Disincentive Effect of Social Assistance," IRISS Working Paper Series 2009-10, IRISS at CEPS/INSTEAD.
  3. Giovanni Sulis, 2009. "Wage Returns to Experience and Tenure for Young Men in Italy," ESE Discussion Papers 189, Edinburgh School of Economics, University of Edinburgh.
  4. Olivier Bargain & Karina Doorley, 2014. "Putting Structure on the RD Design: Social Transfers and Youth Inactivity in France," AMSE Working Papers 1406, Aix-Marseille School of Economics, Marseille, France, revised 23 Feb 2014.
  5. Shintaro Yamaguchi, 2009. "Job Search, Bargaining, and Wage Dynamics," Global COE Hi-Stat Discussion Paper Series gd08-026, Institute of Economic Research, Hitotsubashi University.
  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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