Advanced Search
MyIDEAS: Login to save this paper or follow this series

Returns to Tenure or Seniority?

Contents:

Author Info

  • Sebastian Buhai

    (Aarhus School of Business (Denmark) and Tinbergen Institute/Erasmus University Rotterdam (Netherlands))

  • Miguel Portela

    (Minho University (Portugal))

  • Coen Teulings

    (CPB Netherlands Bureau of Economic Policy Analysis and University of Amsterdam (Netherlands))

  • Aico van Vuuren

    (Free University Amsterdam (Netherlands))

Abstract

This study documents two empirical regularities, using data for Denmark and Portugal. First, workers who are hired last, are the first to leave the firm (Last In, First Out; LIFO). Second, workers' wages rise with seniority (= a worker's tenure relative to the tenure of her colleagues). We seek to explain these regularities by developing a dynamic model of the firm with stochastic product demand and hiring cost (= irreversible specific investments). There is wage bargaining between a worker and its firm. Separations (quits or layoffs) obey the LIFO rule and bargaining is efficient (a zero surplus at the moment of separation). The LIFO rule provides a stronger bargaining position for senior workers, leading to a return to seniority in wages. Efficiency in hiring requires the workers' bargaining power to be in line with their share in the cost of specific investment. Then, the LIFO rule is a way to protect their property right on the specific investment. We consider the effects of Employment Protection Legislation and risk aversion.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.economicdynamics.org/meetpapers/2008/paper_623.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2008 Meeting Papers with number 623.

as in new window
Length:
Date of creation: 2008
Date of revision:
Handle: RePEc:red:sed008:623

Contact details of provider:
Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Fax: 1-314-444-8731
Email:
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(5), pages 972-90, October.
  2. Abowd, John M & Card, David, 1989. "On the Covariance Structure of Earnings and Hours Changes," Econometrica, Econometric Society, Econometric Society, vol. 57(2), pages 411-45, March.
  3. Kuhn, Peter & Robert, Jacques, 1989. "Seniority and Distribution in a Two-Worker Trade Union," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 104(3), pages 485-505, August.
  4. Christian Dustmann & Costas Meghir, 2005. "Wages, Experience and Seniority," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 77-108.
  5. Lu�s M B Cabral & Jos� Mata, 2003. "On the Evolution of the Firm Size Distribution: Facts and Theory," American Economic Review, American Economic Association, American Economic Association, vol. 93(4), pages 1075-1090, September.
  6. I. Sebastian Buhai & Coen N. Teulings, 2014. "Tenure Profiles and Efficient Separation in a Stochastic Productivity Model," Journal of Business & Economic Statistics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 32(2), pages 245-258, April.
  7. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  8. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 13(4), pages 653-77, October.
  9. Moshe Buchinsky & Denis Foug�re & Francis Kramarz & Rusty Tchernis, 2010. "Interfirm Mobility, Wages and the Returns to Seniority and Experience in the United States," Review of Economic Studies, Oxford University Press, vol. 77(3), pages 972-1001.
  10. Joseph G. Altonji & Nicolas Williams, 1997. "Do Wages Rise with Job Seniority? A Reassessment," NBER Working Papers 6010, National Bureau of Economic Research, Inc.
  11. Costas Meghir & Luigi Pistaferri, 2001. "Income variance dynamics and heterogenity," IFS Working Papers, Institute for Fiscal Studies W01/07, Institute for Fiscal Studies.
  12. Marianne Bertrand & Sendhil Mullainathan, 2003. "Enjoying the Quiet Life? Corporate Governance and Managerial Preferences," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 111(5), pages 1043-1075, October.
  13. Kuhn, Peter, 1988. "A Nonuniform Pricing Model of Union Wages and Employment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(3), pages 473-508, June.
  14. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(3), pages 620-38, June.
  15. Robert H. Topel & Michael P. Ward, 1988. "Job Mobility and the Careers of Young Men," NBER Working Papers 2649, National Bureau of Economic Research, Inc.
  16. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, American Economic Association, vol. 71(4), pages 606-20, September.
  17. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  18. Altonji, Joseph G & Shakotko, Robert A, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 54(3), pages 437-59, July.
  19. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, Econometric Society, vol. 50(3), pages 649-70, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Coen Teulings, 2010. "How to Share Our Risks Efficiently? Principles for Optimal Social Insurance and Pension Provision," De Economist, Springer, Springer, vol. 158(1), pages 1-21, April.
  2. Bovenberg, Lans & Teulings, Coen, 2008. "Rhineland Exit?," IZA Discussion Papers 3626, Institute for the Study of Labor (IZA).
  3. von Below, David & Thoursie, Peter, 2008. "Last in, first out? Estimating the effect of seniority rules in Sweden," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 2008:27, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  4. Paulo Bastos & Natália P. Monteiro, 2011. "Managers and Wage Policies," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 20(4), pages 957-984, December.
  5. Anja Deelen, 2012. "Wage-Tenure Profiles and Mobility," De Economist, Springer, Springer, vol. 160(2), pages 141-155, June.
  6. Alexandre, Fernando & Portela, Miguel & Sá, Carla, 2008. "Admission Conditions and Graduates' Employability," IZA Discussion Papers 3530, Institute for the Study of Labor (IZA).
  7. Elena Cottini & Paolo Ghinetti, 2012. "Working Conditions, Lifestyles and Health," Economics Working Papers, School of Economics and Management, University of Aarhus 2012-28, School of Economics and Management, University of Aarhus.
  8. Anja Deelen, 2011. "Wage-Tenure Profiles and Mobility," CPB Discussion Paper, CPB Netherlands Bureau for Economic Policy Analysis 198, CPB Netherlands Bureau for Economic Policy Analysis.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:red:sed008:623. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.