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Wage Premia for Newly Hired Employees: Theory and Evidence

Author

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  • Kampkötter, Patrick

    () (University of Tübingen)

  • Sliwka, Dirk

    () (University of Cologne)

Abstract

We investigate wage differences between newly hired and incumbent employees. We show in a formal model that when employees care for wages as well as match-specific utility, incumbents earn less than new recruits if and only if firm-specific human capital is not too important. The existence and structure of these wage premia is then investigated empirically using detailed personnel data from a large number of banks. We find that, on average, new hires earn more than comparable incumbent colleagues on the same job. But the size of the wage premia varies between jobs and indeed strongly depends on a measure of human capital specificity.

Suggested Citation

  • Kampkötter, Patrick & Sliwka, Dirk, 2011. "Wage Premia for Newly Hired Employees: Theory and Evidence," IZA Discussion Papers 5538, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp5538
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    Cited by:

    1. Esfandiar Maasoumi & Melinda Pitts & Ke Wu, 2014. "The Gap between the Conditional Wage Distributions of Incumbents and the Newly Hired Employees: Decomposition and Uniform Ordering," Advances in Econometrics,in: Essays in Honor of Peter C. B. Phillips, volume 33, pages 587-612 Emerald Publishing Ltd.

    More about this item

    Keywords

    job mobility; wage premia; human capital; new hires; wages;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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