IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Do Wages Rise With Job Seniority?

  • Joseph G. Altonji
  • Robert A. Shakotko

The extent to which wages rise with the accumulation of seniority(tenure) in a firm after one controls for total labor market experience is a fundamental question about the structure of earnings. A variety of studies have found a large, positive partial effect of tenure on wages. This paper re-examines the evidence using a simple instrumental variables scheme to deal with well known estimation biases which arise from the fact that tenure is likely to be related to unobserved individual and job characteristics affecting the wage. We use the variation of tenure over a given job match as the principal instrumental variable for tenure. The variation intenure over the job, in contrast to variation in tenure across individuals and jobs, is uncorrelated by construction with the fixed individual specific and job match specific components of the error term of the wage equation. Our main findingis that the partial effect of tenure on wages is small, and that general labor market experience and job shopping in the labor market account for most wage growth over a career. The strong cross section relationship between tenure and wages is due primarily to heterogeneity bias.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/papers/w1616.pdf
Download Restriction: no

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1616.

as
in new window

Length:
Date of creation: May 1985
Date of revision:
Publication status: published as Review of Economic Studies, Vol. 54, no. 3, pp. 437-460, July 1987
Handle: RePEc:nbr:nberwo:1616
Note: LS
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Web page: http://www.nber.org
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Sherwin Rosen, 1985. "Implicit Contracts: A Survey," NBER Working Papers 1635, National Bureau of Economic Research, Inc.
  2. Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-98, November.
  3. Ann P. Bartel, 1980. "Wages, Nonwage Job Characteristics, and Labor Mobility," NBER Working Papers 0552, National Bureau of Economic Research, Inc.
  4. Wu, De-Min, 1973. "Alternative Tests of Independence Between Stochastic Regressors and Disturbances," Econometrica, Econometric Society, vol. 41(4), pages 733-50, July.
  5. James N. Brown, 1983. "Are Those Paid More Really No More Productive? Measuring the Relative Importance of Tenure Versus On-The-Job Training in Explaining Wage Growth," Working Papers 549, Princeton University, Department of Economics, Industrial Relations Section..
  6. James L. Medoff & Katharine G. Abraham, 1981. "Are Those Paid More Really More Productive? The Case of Experience," Journal of Human Resources, University of Wisconsin Press, vol. 16(2), pages 186-216.
  7. Duncan, Greg J & Hoffman, Saul, 1979. "On-the-Job Training and Earnings Differences by Race and Sex," The Review of Economics and Statistics, MIT Press, vol. 61(4), pages 594-603, November.
  8. Sherwin Rosen, 1972. "Learning and Experience in the Labor Market," Journal of Human Resources, University of Wisconsin Press, vol. 7(3), pages 326-342.
  9. Guasch, J Luis & Weiss, Andrew, 1982. "An Equilibrium Analysis of Wage-Productivity Gaps," Review of Economic Studies, Wiley Blackwell, vol. 49(4), pages 485-97, October.
  10. Maddala, G S, 1971. "The Use of Variance Components Models in Pooling Cross Section and Time Series Data," Econometrica, Econometric Society, vol. 39(2), pages 341-58, March.
  11. James J. Heckman, 1981. "Heterogeneity and State Dependence," NBER Chapters, in: Studies in Labor Markets, pages 91-140 National Bureau of Economic Research, Inc.
  12. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
  13. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
  14. Pencavel, John H, 1972. "Wages, Specific Training, and Labor Turnover in US Manufacturing Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(1), pages 53-64, February.
  15. Farrell Bloch & Mark S. Kuskin, 1978. "Wage determination in the union and nonunion sectors," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 31(2), pages 183-192, January.
  16. Ann P. Bartel & George J. Borjas, 1981. "Wage Growth and Job Turnover: An Empirical Analysis," NBER Chapters, in: Studies in Labor Markets, pages 65-90 National Bureau of Economic Research, Inc.
  17. Hashimoto, Masanori, 1981. "Firm-Specific Human Capital as a Shared Investment," American Economic Review, American Economic Association, vol. 71(3), pages 475-82, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:1616. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.