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Tenure and Experience Effects on Wages: A Theory

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  • Ken Burdett
  • Melvyn Coles

Abstract

This paper investigates equilibria in a labor market where firms post wage/tenure contracts and risk-averse workers, both employed and unemployed, search for better paid job opportunities. Different firms typically offer different contracts. Workers accumulate general human capital through learning-by-doing. With on-the-job search, a worker’s wage evolves endogenously over time through experience effects, tenure effects and quits to better paid employment. This equilibrium approach suggests how to identify econometrically between experience and tenure effects on worker wages.

Suggested Citation

  • Ken Burdett & Melvyn Coles, 2010. "Tenure and Experience Effects on Wages: A Theory," CESifo Working Paper Series 3203, CESifo.
    • Handle: RePEc:ces:ceswps:_3203
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp3203.pdf
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    References listed on IDEAS

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    5. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4, National Bureau of Economic Research, Inc.
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    9. Margaret Stevens, 2004. "Wage-Tenure Contracts in a Frictional Labour Market: Firms' Strategies for Recruitment and Retention," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(2), pages 535-551.
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    Citations

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    Cited by:

    1. Ribas, Vanesa & Dill, Janette S. & Cohen, Philip N., 2012. "Mobility for care workers: Job changes and wages for nurse aides," Social Science & Medicine, Elsevier, vol. 75(12), pages 2183-2190.
    2. Ross Doppelt, 2019. "Skill Flows: A Theory of Human Capital and Unemployment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 31, pages 84-122, January.
    3. Carl Sanders & Christopher Taber, 2012. "Life-Cycle Wage Growth and Heterogeneous Human Capital," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 399-425, July.
    4. Xiao, Chaoqun & Tang, Wansheng & Zhao, Ruiqing & Zhou, Chi, 2013. "Equilibrium search with heterogeneous firms, workers and endogenous human capital," MPRA Paper 52136, University Library of Munich, Germany.

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    More about this item

    Keywords

    experience; tenure; search; equilibrium;
    All these keywords.

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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