What Can We Learn from Displaced Worker Data about the Returns to Tenure?
This paper revisits the issue of what can be learned about wage tenure profiles from displaced worker data. The positive relationship between wages and tenure in cross section data is consistent with the accumulation of firm specific capital. Alternatively, it may be explained by unobserved heterogeneity across workers, or by on-th-job search. Displaced worker data is quite helpful in correcting for the first possible bias, but less so for the second.
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