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Returns to Type or Tenure?

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  • Robert Amann

    ()
    (Department of Economics, University of Konstanz)

  • Tobias Klein

    ()
    (Department of Economics, University of Mannheim)

Abstract

This paper takes a closer look at the way unobserved characteristics of individuals confound wages and firm tenure. In turn of our structural analysis, which is built on estimating a reduced form for tenure and a structural wage equation, we disentangle returns to a latent type variable from estimates of general returns to tenure. The obtained results for Germany indicate that the type plays a crucial role in the remuneration of employees. As compared to types who stay, quitters earn less on average, but obtain steeper wage profiles in tenure. This nonseparability has previously remained unnoticed in the literature.

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Bibliographic Info

Paper provided by Research Group Heterogeneous Labor, University of Konstanz/ZEW Mannheim in its series Working Papers of the Research Group Heterogenous Labor with number 06-13.

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Length: 28 pages
Date of creation: 03 Aug 2006
Date of revision:
Handle: RePEc:knz:hetero:0613

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Keywords: Returns to tenure ; unobserved heterogeneity ; control function approach ; nonseparable model;

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  1. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(1), pages 145-76, February.
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  3. James J. Heckman & Sergio Urzua & Edward Vytlacil, 2009. "Understanding Instrumental Variables in Models with Essential Heterogeneity," Working Papers, Geary Institute, University College Dublin 200941, Geary Institute, University College Dublin.
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  19. Hutchens, Robert M, 1989. "Seniority, Wages and Productivity: A Turbulent Decade," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 49-64, Fall.
  20. Garen, John, 1984. "The Returns to Schooling: A Selectivity Bias Approach with a Continuous Choice Variable," Econometrica, Econometric Society, Econometric Society, vol. 52(5), pages 1199-1218, September.
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  23. James Heckman & Edward Vytlacil, 1998. "Instrumental Variables Methods for the Correlated Random Coefficient Model: Estimating the Average Rate of Return to Schooling When the Return is Correlated with Schooling," Journal of Human Resources, University of Wisconsin Press, vol. 33(4), pages 974-987.
  24. Angrist, Joshua D & Graddy, Kathryn & Imbens, Guido W, 2000. "The Interpretation of Instrumental Variables Estimators in Simultaneous Equations Models with an Application to the Demand for Fish," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 67(3), pages 499-527, July.
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Cited by:
  1. Laura Hospido, 2009. "Job changes and individual-job specific wage dynamics," Banco de Espa�a Working Papers 0907, Banco de Espa�a.
  2. Robert Orlowski & Regina T. Riphahn, 2007. "Seniority in Germany: New Evidence on Returns to Tenure for Male Full-time Workers," Working Papers 036, Bavarian Graduate Program in Economics (BGPE).
  3. repec:iab:iabzaf:v:41:i:2/3:p:139-155 is not listed on IDEAS

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