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

Author

Listed:
  • Magali Beffy

    (Crest)

  • Moshe Buchinsky

    (Crest)

  • Denis Fougère

    (Crest)

  • Thierry Kamionka

    (Crest)

  • Francis Kramarz

    (Crest)

Abstract

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, Fougère, 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.

Suggested Citation

  • Magali Beffy & Moshe Buchinsky & Denis Fougère & Thierry Kamionka & Francis Kramarz, 2006. "The Returns to Seniority in France (and Why are They Lower than in the United States ?)," Working Papers 2006-05, Center for Research in Economics and Statistics.
  • Handle: RePEc:crs:wpaper:2006-05
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Bargain, Olivier & Doorley, Karina, 2013. "Putting Structure on the RD Design: Social Transfers and Youth Inactivity in France," IZA Discussion Papers 7508, Institute for the Study of Labor (IZA).
    2. Bargain, Olivier & Doorley, Karina, 2009. "Caught in the Trap? The Disincentive Effect of Social Assistance," IRISS Working Paper Series 2009-10, IRISS at CEPS/INSTEAD.
    3. Hospido, Laura, 2015. "Wage dynamics in the presence of unobserved individual and job heterogeneity," Labour Economics, Elsevier, vol. 33(C), pages 81-93.
    4. Shintaro Yamaguchi, 2010. "Job Search, Bargaining, and Wage Dynamics," Journal of Labor Economics, University of Chicago Press, vol. 28(3), pages 595-631, July.
    5. Giovanni Sulis, 2014. "Wage Returns to Experience and Tenure for Young Men in Italy," Scottish Journal of Political Economy, Scottish Economic Society, vol. 61(5), pages 559-588, November.
    6. Ioana Marinescu & Margaret Triyana, 2016. "The sources of wage growth in a developing country," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-43, December.
    7. Sabrina Di Addario & Eleonora Patacchini, 2006. "Is there an urban wage premium in Italy?," Temi di discussione (Economic working papers) 570, Bank of Italy, Economic Research and International Relations Area.
    8. Denis Fougère, 2011. "Social and Labor Market Integration of Ethnic Minorities in France: Has the French Integration Model Broken Down?," Chapters,in: Ethnic Diversity in European Labor Markets, chapter 5 Edward Elgar Publishing.
    9. Olivier Goudet & Gérard Ballot & Jean-Daniel Kant, 2015. "How to choose a contract type in the French Labor Market : an agent-based model," Post-Print hal-01512938, HAL.
    10. Sabrina Di Addario & Eleonora Patacchini, 2005. "Wages and the City. The Italian case," Economics Series Working Papers 243, University of Oxford, Department of Economics.

    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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