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Earnings Instability and Tenure

  • Cappellari, Lorenzo

    ()

    (Università Cattolica del Sacro Cuore)

  • Leonardi, Marco

    ()

    (University of Milan)

This paper develops a tractable empirical approach to estimate the effect of on-the-job tenure on the permanent and the transitory variance of earnings. The model is also used to evaluate earnings instability associated with fixed-term contracts (short-tenure contracts) in Italy. Our results indicate that each year of tenure on the job reduces earnings instability on average by 15%. Workers on a fixed-term contract on average have an earnings instability 10% higher than workers on a permanent contract. Workers who spend their entire working life on fixed-term contracts can expect an earnings instability twice as high.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2527.

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Length: 33 pages
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:iza:izadps:dp2527
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