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Interfirm Mobility, Wages, and the Returns to Seniority and Experience in the U.S

  • Buchinsky, Moshe

    ()

    (University of California, Los Angeles)

  • Fougère, Denis

    ()

    (CREST)

  • Kramarz, Francis

    ()

    (CREST (ENSAE))

  • Tchernis, Rusty

    ()

    (Georgia State University)

Much of the research in labor economics during the 1980s and the early 1990s was devoted to the analysis of changes in the wage structure across many of the world’s economies. Only recently, has research turned to the analysis of mobility in its various guises. From the life cycle perspective, decreased wage mobility and increased job instability, makes the phenomenon of increasing wage inequality more severe than it appears to be at first sight. In general, workers’ wages may change through two channels: (a) return to their firm-specific human capital (seniority); or (b) inter-firm wage mobility. Our theoretical model gives rise to three equations: (1) a participation equation; (2) a wage equation; and (3) an interfirm mobility equation. In this model the wage equation is estimated simultaneously with the two decision equations. We use the Panel Study of Income Dynamics (PSID) to estimate the model for three education groups. Our main finding is that returns to seniority are quite high for all education groups. On the other hand, the returns to experience appear to be similar to those previously found in the literature.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1521.

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Length: 72 pages
Date of creation: Mar 2005
Date of revision:
Publication status: published in: Review of Economic Studies, 2010, 77 (3), 972-1001
Handle: RePEc:iza:izadps:dp1521
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  1. Chib, Siddhartha & Greenberg, Edward, 1996. "Markov Chain Monte Carlo Simulation Methods in Econometrics," Econometric Theory, Cambridge University Press, vol. 12(03), pages 409-431, August.
  2. Denis Fougère & Thierry Kamionka, 2002. "Bayesian Inference for the Mover-Stayer Model in Continuous Time with an Application to Labour Market Transition Data," Working Papers 2002-23, Centre de Recherche en Economie et Statistique.
  3. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1992. "Earnings losses of displaced workers," Working Paper Series, Macroeconomic Issues 92-28, Federal Reserve Bank of Chicago.
  4. Altonji, Joseph G & Shakotko, Robert A, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 437-59, July.
  5. Gibbons, Robert & Katz, Lawrence F., 1991. "Layoffs and Lemons," Scholarly Articles 3442782, Harvard University Department of Economics.
  6. Abowd, J.M. & Kramarz, F. & Margolis, D.N., 1995. "High-Wage Workers and High-Wage Firms," Cahiers de recherche 9503, Universite de Montreal, Departement de sciences economiques.
  7. Katharine G. Abraham & Henry S. Farber, 1986. "Job Duration, Seniority and Earnings," Working papers 407, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Parent, Daniel, 2000. "Industry-Specific Capital and the Wage Profile: Evidence from the National Longitudinal Survey of Youth and the Panel Study of Income Dynamics," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 306-23, April.
  9. Lee A. Lillard & Robert J. Willis, 1976. "Dynamic Aspects of Earnings Mobility," NBER Working Papers 0150, National Bureau of Economic Research, Inc.
  10. Chib, Siddhartha & Hamilton, Barton H., 2002. "Semiparametric Bayes analysis of longitudinal data treatment models," Journal of Econometrics, Elsevier, vol. 110(1), pages 67-89, September.
  11. Robert H. Topel, 1990. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," NBER Working Papers 3294, National Bureau of Economic Research, Inc.
  12. Joseph G. Altonji & Nicolas Williams, 1997. "Do Wages Rise with Job Seniority? A Reassessment," NBER Working Papers 6010, National Bureau of Economic Research, Inc.
  13. Pakes, Ariel & Pollard, David, 1989. "Simulation and the Asymptotics of Optimization Estimators," Econometrica, Econometric Society, vol. 57(5), pages 1027-57, September.
  14. Daniel McFadden, 1987. "A Method of Simulated Moments for Estimation of Discrete Response Models Without Numerical Integration," Working papers 464, Massachusetts Institute of Technology (MIT), Department of Economics.
  15. Moshe Buchinsky & Jennifer Hunt, 1996. "Wage Mobility in the United States," NBER Working Papers 5455, National Bureau of Economic Research, Inc.
  16. Parent, Daniel, 1999. "Wages and Mobility: The Impact of Employer-Provided Training," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 298-317, April.
  17. David Card, 2000. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," NBER Working Papers 7769, National Bureau of Economic Research, Inc.
  18. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-77, October.
  19. Addison, John T & Portugal, Pedro, 1989. "Job Displacement, Relative Wage Changes, and Duration of Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 7(3), pages 281-302, July.
  20. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
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  22. 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.
  23. Chib, Siddhartha, 2001. "Markov chain Monte Carlo methods: computation and inference," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 57, pages 3569-3649 Elsevier.
  24. repec:cup:etheor:v:12:y:1996:i:3:p:409-31 is not listed on IDEAS
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