Returns to Tenure or Seniority?

descriptionPublicationkeyboard_double_arrow_right Article , Research , Other literature type , Preprint 01 Jan 2008Embargo end date: 22 Apr 2016 Netherlands, Portugal, United Kingdom, Denmark English Publisher:Elsevier BVJournal:SSRN Electronic Journal (eissn: 1556-5068,

Copyright policy )Funded by:EC | SMSS

Authors: Buhai, I.S.; Portela, M.A.; Teulings, C.N.; van Vuuren, A.;

Returns to Tenure or Seniority?

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Abstract

This study documents two empirical facts using matched employer-employee data for Denmark and Portugal. First, workers who are hired last, are the first to leave the firm. Second, workers' wages rise with seniority (= a worker's tenure relative to the tenure of her colleagues). The identification problems for the wage return to tenure are shown not to apply to the return to seniority because seniority is not a deterministic function of time. Controlling for tenure, the probability of leaving the firm decreases with seniority. The increase in expected seniority with tenure explains a large part of the negative duration dependence of the hazard. Using a variety of estimation methods, we show that a 10% increase in seniority raises your wage by 0.1-0.2%, depending on the country and the method applied. Conditional on ten years of tenure, one standard deviation of seniority raises your wage by 0.5 to 1.6 percent. Forthcoming in Econometrica.

Countries

Netherlands, Portugal, United Kingdom, Denmark

Related Organizations

Stockholm University
Sweden
Institute for the Study of Labor
Germany
UNIVERSITEIT VAN AMSTERDAM
Netherlands
CPB Netherlands Bureau for Economic Policy Analysis
Netherlands
Aarhus University
Denmark

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Keywords

irreversible investment; efficient bargaining; seniority; LIFO; matched employer-employee data; EPL, 330, Labor market, contracts, Lohn, 38 Economics, Betriebszugehörigkeit, 3801 Applied Economics, Seniority, matched employer-employee data, J31, efficient bargaining, Verhandlungstheorie, efficient bargaining; EPL; irreversible investment; LIFO; matched employer-employee data; seniority, Wage Dynamics, Portugal, ddc:330, Tenure, seniority, irreversible investment, efficient bargaining, seniority, LIFO, matched employer-employee data, EPL, irreversible investment; efficient bargaining; seniority; LIFO, irreversible investment, efficient bargaining, seniority, LIFO, matched employer-employee data, EPL., Irreversible investment, Dänemark, seniority, efficient bargaining, irreversible investment, LIFO, matched employer-employee data, EPL, SDG 8 - Decent Work and Economic Growth, Matched employer-employee data, Erwerbsverlauf, Risikoaversion, wage dynamics, last-in-first-out, Efficient bargaining, Last-In-First-Out., tenure, J41, J63, LIFO, irreversible investment, Arbeitnehmerschutz, EPL, Theorie, jel: jel:J41, jel: jel:J63, jel: jel:J31

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