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Performance, seniority, and wages: formal salary systems and individual earnings profiles

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Listed author(s):
  • Dohmen, Thomas J.

Abstract

This paper replicates studies by Medoff and Abraham (1980, 1981) and Flabbi and Ichino (2001) using personnel data from the Dutch national aircraft manufacturer Fokker. It shows how a formal salary system, as is widely used by large firms, brings about that seniority-wage profiles are largely independent of controls for reported performance in cross-sectional wage regressions even though supervisors' evaluations shape life-cycle earnings profiles. Performance ratings determine how fast a worker climbs the firm's career and wage ladder. The paper also reveals that real wage growth depends on the employer's prosperity. Furthermore it demonstrates that formal salary systems cause serial correlation in wage growth and 'Green Card' effects.

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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 11 (2004)
Issue (Month): 6 (December)
Pages: 741-763

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Handle: RePEc:eee:labeco:v:11:y:2004:i:6:p:741-763
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

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Find related papers by JEL classification:
  • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
  • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
  • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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