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Job Tenure, Wages and Technology: A Reassessment Using Matched Worker-Firm Panel Data

  • Givord, Pauline
  • Maurin, Eric

This Paper presents new estimates of the impact of job tenure on wages using a new French matched worker-firm dataset. We develop an identification strategy that relies on one specific feature of the French labour laws. They stipulate that firms, when firing workers, must include as one of their criteria the number of dependent children of their employees. Our dataset confirms that workers with a relatively large number of dependent children at the entry in the firm are, ceteris paribus, less likely to be laid-off and have on average higher job tenure than their co-workers with a relatively small number of dependent children. Within this framework, the relative number of children at entry in the firm represents a plausibly valid instrumental variable for identifying the impact of job tenure on wages. Our new IV estimate of the return to job tenure (3.1% per year) is much larger than the OLS estimate (1%). This result holds true regardless of whether we focus on educated or non-educated workers, men or women. The downward bias which affects OLS estimates suggests that workers who receive relatively high wage offers tend to change firms more rapidly: they tend to have relatively high wages and low job tenure. Regarding trends, our new IV estimator suggests that the returns to job tenure have declined over the 1990s in the industries where the share of educated workers is the largest. The technologies that complement highly skilled labour seem to drive a decline in the incentive to keep workers over long periods of time and, as a consequence, a decline in the impact of tenure on wages.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4147.

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Date of creation: Dec 2003
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Handle: RePEc:cpr:ceprdp:4147
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  1. Maurin, Eric & Thesmar, David, 2003. "Changes in the Functional Structure of Firms and the Demand for Skill," CEPR Discussion Papers 3831, C.E.P.R. Discussion Papers.
  2. 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 145-76, February.
  3. Katharine G. Abraham & Henry S. Farber, 1986. "Job Duration, Seniority, and Earnings," NBER Working Papers 1819, National Bureau of Economic Research, Inc.
  4. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The Skill Content Of Recent Technological Change: An Empirical Exploration," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1279-1333, November.
  5. Katharine G. Abraham & Henry S. Farber, 1987. "Returns to Seniority in Union and Nonunion Jobs: A New Look at the Evidence," NBER Working Papers 2368, National Bureau of Economic Research, Inc.
  6. Buchinsky, Moshe & Fougère, Denis & Kramarz, Francis & Tchernis, Rusty, 2005. "Interfirm Mobility, Wages, and the Returns to Seniority and Experience in the U.S," IZA Discussion Papers 1521, Institute for the Study of Labor (IZA).
  7. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  8. Christian Dustmann & Costas Meghir, 1999. "Wages, experience and seniority," IFS Working Papers W99/01, Institute for Fiscal Studies.
  9. Gibbons, R. & Katz, L.F., 1989. "Layoffs And Lemons," Working papers 531, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Joseph G. Altonji & Nicolas Williams, 1997. "Do Wages Rise with Job Seniority? A Reassessment," NBER Working Papers 6010, National Bureau of Economic Research, Inc.
  11. David N. Margolis, 1995. "Cohort Effects and Returns to Seniority in France," CIRANO Working Papers 95s-46, CIRANO.
  12. Éric Maurin & Dominique Goux, 1994. "Éducation, expérience et salaire," Économie et Prévision, Programme National Persée, vol. 116(5), pages 155-178.
  13. Farber, Henry S., 1999. "Mobility and stability: The dynamics of job change in labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 37, pages 2439-2483 Elsevier.
  14. Kletzer, Lori Gladstein, 1989. "Returns to Seniority after Permanent Job Loss," American Economic Review, American Economic Association, vol. 79(3), pages 536-43, June.
  15. Addison, John T & Portugal, Pedro, 1989. "Job Displacement, Relative Wage Changes, and Duration of Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 7(3), pages 281-302, July.
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