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Do Wages Rise with Job Seniority?

  • Altonji, Joseph G
  • Shakotko, Robert A

Many previous studies have found a strong positive effect of job seniority (tenure) on wag es. This paper reexamines the evidence using a simple instrumental va riables scheme to deal with the fact that tenure is likely to be rela ted to unobserved individual and job characteristics that affect the wage. The main finding is that the partial effect of tenure on wages is small and that general labor market experience and job shopping ac count for most wage growth over a career. The strong cross section re lationship between tenure and wages is due primarily to heterogeneity bias. Copyright 1987 by The Review of Economic Studies Limited.

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Article provided by Wiley Blackwell in its journal Review of Economic Studies.

Volume (Year): 54 (1987)
Issue (Month): 3 (July)
Pages: 437-59

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Handle: RePEc:bla:restud:v:54:y:1987:i:3:p:437-59
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  1. Ann P. Bartel & George J. Borjas, 1978. "Wage Growth and Job Turnover: An Empirical Analysis," NBER Working Papers 0285, National Bureau of Economic Research, Inc.
  2. Wu, De-Min, 1973. "Alternative Tests of Independence Between Stochastic Regressors and Disturbances," Econometrica, Econometric Society, vol. 41(4), pages 733-50, July.
  3. Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-98, November.
  4. Hashimoto, Masanori, 1981. "Firm-Specific Human Capital as a Shared Investment," American Economic Review, American Economic Association, vol. 71(3), pages 475-82, June.
  5. Pencavel, John H, 1972. "Wages, Specific Training, and Labor Turnover in US Manufacturing Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(1), pages 53-64, February.
  6. Ann P. Bartel, 1980. "Wages, Nonwage Job Characteristics, and Labor Mobility," NBER Working Papers 0552, National Bureau of Economic Research, Inc.
  7. Maddala, G S, 1971. "The Use of Variance Components Models in Pooling Cross Section and Time Series Data," Econometrica, Econometric Society, vol. 39(2), pages 341-58, March.
  8. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
  9. Guasch, J Luis & Weiss, Andrew, 1982. "An Equilibrium Analysis of Wage-Productivity Gaps," Review of Economic Studies, Wiley Blackwell, vol. 49(4), pages 485-97, October.
  10. James N. Brown, 1983. "Are Those Paid More Really No More Productive? Measuring the Relative Importance of Tenure Versus On-The-Job Training in Explaining Wage Growth," Working Papers 549, Princeton University, Department of Economics, Industrial Relations Section..
  11. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
  12. Sherwin Rosen, 1972. "Learning and Experience in the Labor Market," Journal of Human Resources, University of Wisconsin Press, vol. 7(3), pages 326-342.
  13. Sherwin Rosen, 1985. "Implicit Contracts: A Survey," NBER Working Papers 1635, National Bureau of Economic Research, Inc.
  14. James L. Medoff & Katharine G. Abraham, 1981. "Are Those Paid More Really More Productive? The Case of Experience," Journal of Human Resources, University of Wisconsin Press, vol. 16(2), pages 186-216.
  15. James J. Heckman, 1981. "Heterogeneity and State Dependence," NBER Chapters, in: Studies in Labor Markets, pages 91-140 National Bureau of Economic Research, Inc.
  16. Farrell Bloch & Mark S. Kuskin, 1978. "Wage determination in the union and nonunion sectors," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 31(2), pages 183-192, January.
  17. Duncan, Greg J & Hoffman, Saul, 1979. "On-the-Job Training and Earnings Differences by Race and Sex," The Review of Economics and Statistics, MIT Press, vol. 61(4), pages 594-603, November.
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