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Wages, experience and seniority

Author

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  • Christian Dustmann

    (Institute for Fiscal Studies and University College London)

  • Costas Meghir

    (Institute for Fiscal Studies and Yale University)

Abstract

This paper develops and estimates a human capital model of wage growth based on learning by doing. Learning by doing rates are assumed to be heterogeneous and firms offer different career structures in terms of the rate of acquisition of firm specific human capital. The model is estimated using a unique data set drawn from German adninistrative records and including a complete employment and earnings history for each worker in our sample. We find evidence of increased labour market attachments for individuals with higher returns to experience. This has important implications for the estimates. The estimated returns to experimence are 2.7% a year. The returns to tenure are close to zero. Crucial identifying information is provided by plant closures.

Suggested Citation

  • Christian Dustmann & Costas Meghir, 1999. "Wages, experience and seniority," IFS Working Papers W99/01, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:99/01
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    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
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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