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Earnings Instability and Tenure

  • Lorenzo Cappellari
  • Marco Leonardi

We study the effect of tenure on earnings instability in Italy using two alternative estimation strategies. First we use a descriptive measure of earnings instability and fixed effects regressions. Second, we develop a formal model of earnings dynamics distinguishing permanent from transitory earnings, and exploit variation of tenure and instability over time and across birth cohorts in estimation. We use the two approaches also to evaluate earnings instability associated with temporary contracts (short-tenure contracts). Our results indicate that each year of tenure on the job reduces earnings instability on average by 11%. Workers on a temporary contract have an earnings instability up to 50% higher than workers on a permanent contract.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4145.

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Date of creation: 2013
Date of revision:
Handle: RePEc:ces:ceswps:_4145
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  24. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-77, October.
  25. Lorenzo Cappellari, 2004. "The Dynamics and Inequality of Italian Men’s Earnings: Long-term Changes or Transitory Fluctuations?," Journal of Human Resources, University of Wisconsin Press, vol. 39(2).
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  28. Ann Huff Stevens, 2001. "Changes in earnings instability and job loss," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 55(1), pages 60-78, October.
  29. Robert A. Moffitt & Peter Gottschalk, 2002. "Trends in the Transitory Variance of Earnings in the United States," Economic Journal, Royal Economic Society, vol. 112(478), pages C68-C73, March.
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  33. repec:oup:qjecon:v:107:y:1992:i:2:p:439-79 is not listed on IDEAS
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