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Seniority in Germany: New Evidence on Returns to Tenure for Male Full-time Workers

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  • Robert Orlowski
  • Regina T. Riphahn

Abstract

This study uses recent data taken from the German Socioeconomic Panel (2002-2006) to evaluate the extent of and heterogeneity in returns to tenure for men in East and West Germany, employed in both the private and the public sector. We find significantly different wage patterns in East- and West Germany as well as between the private and public sector. Independent of the particular subsample, the application of the Altonji-Shakotko estimation approach yields minute and insignificant returns to tenure and more substantial returns to experience. The profile of the East German wage structure is surprisingly flat: after the first ten years of experience - and in contrast to the situation in West Germany - there appear to be no returns to additional general human capital.

Suggested Citation

  • Robert Orlowski & Regina T. Riphahn, 2007. "Seniority in Germany: New Evidence on Returns to Tenure for Male Full-time Workers," Working Papers 036, Bavarian Graduate Program in Economics (BGPE).
  • Handle: RePEc:bav:wpaper:036_orlowski_riphahn
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    File URL: http://www.bgpe.de/texte/DP/036_orlowski_riphahn.pdf
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    References listed on IDEAS

    as
    1. Cornelia Luchsinger & Rafael Lalive & Jörg Wild, 2003. "Do Wages Rise with Job Seniority? The Swiss Case," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 139(II), pages 207-229, June.
    2. Riphahn, Regina T., 2004. "Employment protection and effort among German employees," Economics Letters, Elsevier, vol. 85(3), pages 353-357, December.
    3. Axel Heitmueller & Kostas G. Mavromaras, 2007. "On The Post-Unification Development Of Public And Private Pay In Germany," Manchester School, University of Manchester, vol. 75(4), pages 422-444, July.
    4. Dustmann, Christian & van Soest, Arthur, 1998. "Public and private sector wages of male workers in Germany," European Economic Review, Elsevier, vol. 42(8), pages 1417-1441, September.
    5. Parent, Daniel, 2000. "Industry-Specific Capital and the Wage Profile: Evidence from the National Longitudinal Survey of Youth and the Panel Study of Income Dynamics," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 306-323, April.
    6. Christian Dustmann & Costas Meghir, 2005. "Wages, Experience and Seniority," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 77-108.
    7. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-176, February.
    8. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
    9. Elke Holst & Dean R. Lillard & Thomas A. DiPrete, 2001. "Proceedings of the 2000 Fourth International Conference of German Socio-Economic Panel Study Users (GSOEP 2000): Editorial Introduction," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 70(1), pages 5-6.
    10. Blaise Melly, 2005. "Public-private sector wage differentials in Germany: Evidence from quantile regression," Empirical Economics, Springer, vol. 30(2), pages 505-520, September.
    11. Balestra, Pietro & Varadharajan-Krishnakumar, Jayalakshmi, 1987. "Full Information Estimations of a System of Simultaneous Equations with Error Component Structure," Econometric Theory, Cambridge University Press, vol. 3(02), pages 223-246, April.
    12. Joseph G. Altonji & Robert A. Shakotko, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Oxford University Press, vol. 54(3), pages 437-459.
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    More about this item

    Keywords

    returns to tenure; seniority; earnings patterns; private and public sector;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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