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The Returns to Seniority in France (and Why are They Lower than in the United States ?)

  • Magali Beffy

    (Crest)

  • Moshe Buchinsky

    (Crest)

  • Denis Fougère

    (Crest)

  • Thierry Kamionka

    (Crest)

  • Francis Kramarz

    (Crest)

We estimate a model of the joint participation and mobility along with the individuals’wage formation in France. Our model makes it possible to distinguish between unobservedperson heterogeneity and state-dependence. We estimate the model using state of the artbayesian methods employing a long panel (1976-1995) for France. Our results clearly showthat returns to seniority are small, and for some education groups are close to zero. Thespecification here is the same as that used in Buchinsky, Foug`ere, Kramarz and Tchernis(2002), where the returns to seniority were found to be quite large. This result also holdswhen using the method employed by Altonji andWilliams (1992) for both countries. It turnsout that differences between the two countries relate to firm-to-firm mobility. Using a modelof Burdett and Coles (2003), we explain the rationale for this phenomenon. Specifically, ina low-mobility country such as France, there is little gain in compensating workers for longtenures because they tend to stay in the firm for most, if not all, of their career. This is trueeven in cases where individuals clearly posses susbtantial amount of firm-specific humancapital. In contrast, for a high-mobility country such as the United States, high returns toseniority have a clear incentive effect, and firms are induced to pay the premium associatedwith firm-specific human capital to avoid losing their most productive workers.

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Paper provided by Centre de Recherche en Economie et Statistique in its series Working Papers with number 2006-05.

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Length: 53
Date of creation: 2006
Date of revision:
Handle: RePEc:crs:wpaper:2006-05
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  1. Lee A. Lillard & Robert J. Willis, 1976. "Dynamic Aspects of Earnings Mobility," NBER Working Papers 0150, National Bureau of Economic Research, Inc.
  2. repec:inr:wpaper:155908 is not listed on IDEAS
  3. Abraham, Katharine G & Farber, Henry S, 1987. "Job Duration, Seniority, and Earnings," American Economic Review, American Economic Association, vol. 77(3), pages 278-97, June.
  4. Flinn, Christopher J, 1986. "Wages and Job Mobility of Young Workers," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S88-S110, June.
  5. Postel-Vinay, Fabien & Robin, Jean-Marc, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," CEPR Discussion Papers 3548, C.E.P.R. Discussion Papers.
  6. John M. Abowd & Francis Kramarz & David N. Margolis, 1994. "High-Wage Workers and High-Wage Firms," CIRANO Working Papers 94s-23, CIRANO.
  7. Moshe Buchinsky & Denis Fougère & Francis Kramarz & Rusty Tchernis, 2008. "Interfirm Mobility, Wages, and the Returns to Seniority and Experience in the U.S," Caepr Working Papers 2008-006, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  8. Joseph G. Altonji & Nicolas Williams, 1997. "Do Wages Rise with Job Seniority? A Reassessment," NBER Working Papers 6010, National Bureau of Economic Research, Inc.
  9. Miller, Robert A, 1984. "Job Matching and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1086-120, December.
  10. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-20, September.
  11. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
  12. Robert H. Topel, 1990. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," NBER Working Papers 3294, National Bureau of Economic Research, Inc.
  13. Altonji, Joseph G & Shakotko, Robert A, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 437-59, July.
  14. Ken Burdett & Melvyn Coles, 2003. "Equilibrium Wage-Tenure Contracts," Econometrica, Econometric Society, vol. 71(5), pages 1377-1404, 09.
  15. Joseph G. Altonji & Nicolas Williams, 1992. "The Effects of Labor Market Experience, Job Seniority, and Job Mobility on Wage Growth," NBER Working Papers 4133, National Bureau of Economic Research, Inc.
  16. Salop, Joanne & Salop, Steven, 1976. "Self-Selection and Turnover in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 619-27, November.
  17. Jolivet, Gregory & Postel-Vinay, Fabien & Robin, Jean-Marc, 2006. "The empirical content of the job search model: Labor mobility and wage distributions in Europe and the US," European Economic Review, Elsevier, vol. 50(4), pages 877-907, May.
  18. Jacob Mincer, 1974. "Progress in Human Capital Analysis of the Distribution of Earnings," NBER Working Papers 0053, National Bureau of Economic Research, Inc.
  19. Jovanovic, Boyan, 1979. "Firm-specific Capital and Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1246-60, December.
  20. Dean R. Hyslop, 1999. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Labor Force Participation of Married Women," Econometrica, Econometric Society, vol. 67(6), pages 1255-1294, November.
  21. Jovanovic, Boyan, 1984. "Matching, Turnover, and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 108-22, February.
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