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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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References

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  1. Heckman, James J. & Urzua, Sergio & Vytlacil, Edward, 2006. "Understanding Instrumental Variables in Models with Essential Heterogeneity," IZA Discussion Papers 2320, Institute for the Study of Labor (IZA).
  2. Gathmann, Christina & Schönberg, Uta, 2006. "How General Is Specific Human Capital?," IZA Discussion Papers 2485, Institute for the Study of Labor (IZA).
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  17. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-77, October.
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  19. Garen, John, 1984. "The Returns to Schooling: A Selectivity Bias Approach with a Continuous Choice Variable," Econometrica, Econometric Society, vol. 52(5), pages 1199-1218, September.
  20. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
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  23. 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, vol. 67(3), pages 499-527, July.
  24. Kletzer, Lori Gladstein, 1989. "Returns to Seniority after Permanent Job Loss," American Economic Review, American Economic Association, vol. 79(3), pages 536-43, June.
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Cited by:
  1. Orlowski, Robert & Riphahn, Regina T., 2008. "Seniority in Germany: New evidence on returns to tenure for male full-time workers," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 41(2/3), pages 139-155.
  2. Hospido, Laura, 2010. "Job Changes and Individual-Job Specific Wage Dynamics," IZA Discussion Papers 5088, Institute for the Study of Labor (IZA).
  3. repec:iab:iabzaf:v:41:i:2/3:p:139-155 is not listed on IDEAS

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