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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. Katharine G. Abraham & Henry S. Farber, 1986. "Job Duration, Seniority and Earnings," Working papers 407, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. 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).
  3. 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.
  4. 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.
  5. Jacob Mincer, 1974. "Progress in Human Capital Analysis of the Distribution of Earnings," NBER Working Papers 0053, National Bureau of Economic Research, Inc.
  6. Joseph Altonji & R. Shakotko, 1985. "Do Wages Rise with Job Seniority?," Working Papers 567, Princeton University, Department of Economics, Industrial Relations Section..
  7. Jovanovic, Boyan, 1984. "Matching, Turnover, and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 108-22, February.
  8. Lillard, Lee A & Willis, Robert J, 1978. "Dynamic Aspects of Earning Mobility," Econometrica, Econometric Society, vol. 46(5), pages 985-1012, September.
  9. 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.
  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. Jovanovic, Boyan, 1979. "Firm-specific Capital and Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1246-60, December.
  12. Miller, Robert A, 1984. "Job Matching and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1086-120, December.
  13. Robert H. Topel, 1990. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," NBER Working Papers 3294, National Bureau of Economic Research, Inc.
  14. 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.
  15. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium wage dispersion with worker and employer heterogeneity," Sciences Po publications info:hdl:2441/dc0ckec3fcb, Sciences Po.
  16. Joseph G. Altonji & Nicolas Williams, 2005. "Do wages rise with job seniority? A reassessment," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 58(3), pages 370-397, April.
  17. Ken Burdett & Melvyn Coles, 2003. "Equilibrium Wage-Tenure Contracts," Econometrica, Econometric Society, vol. 71(5), pages 1377-1404, 09.
  18. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
  19. Postel-Vinay & Robin, 2002. "Equilibrium wage dispersion with worker and employer heterogeneity," Working Papers 155908, Institut National de la Recherche Agronomique, France.
  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. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
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