Measuring the Gap between Wage and Productivity: Wage-Tenure Profile and Productivity-Tenure Profile Cross Twice
This paper proposes a new empirical method to measure the gap between wage and productivity of workers. Our method aggregates Mincer-type human capital function of all workers of a firm and obtains the total labor input. We put it into the Cobb-Douglas production function and estimate the coefficients of gap between wage and productivity. Applying the method to employer-employee matched panel data, we find that wagetenure profile and productivity-tenure profile intersect twice. The wage is higher than the productivity in junior years, then surpassed by the productivity in middle age, and becomes higher again in late career. The results are consistent with both of Becker's firm sponsored training model and Lazear's deferred compensation model.
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- Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
- Hellerstein, Judith K & Neumark, David & Troske, Kenneth R, 1999.
"Wages, Productivity, and Worker Characteristics: Evidence from Plant-Level Production Functions and Wage Equations,"
Journal of Labor Economics,
University of Chicago Press, vol. 17(3), pages 409-46, July.
- Judith K. Hellerstein & David Neumark & Kenneth R. Troske, 1996. "Wages, Productivity, and Worker Characteristics: Evidence from Plant-Level Production Functions and Wage Equations," NBER Working Papers 5626, National Bureau of Economic Research, Inc.
- "Kawaguchi, Daiji" & "Kwon, HyeogUg" & "Shimizutani, Satoshi" & "Fukao, Kyoji" & "Makino, Tatsuji" & "Yokoyama, Izumi" & "Kambayashi, Ryo" & "Kim, YoungGak", 2007. "Are Wage‐tenure Profiles Steeper than Productivity‐tenure Profiles?―Evidence from Japanese Establishment Data from the Census of Manufacturers and the Basic Survey Wage Structure―," Economic Review, Hitotsubashi University, vol. 58(1), pages 61-90, January.
- Lazear, Edward P & Moore, Robert L, 1984. "Incentives, Productivity, and Labor Contracts," The Quarterly Journal of Economics, MIT Press, vol. 99(2), pages 275-96, May.
- Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
- Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, August.
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