Journal Article

Wages, Experience and Seniority

Christian Dustmann and Costas Meghir

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 72, issue 1, pages 77-108
Published in print January 2005 | ISSN: 0034-6527
Published online January 2005 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/0034-6527.00325
Wages, Experience and Seniority

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  • Demand and Supply of Labour
  • Particular Labour Markets
  • Intertemporal Choice and Growth
  • Wages, Compensation, and Labour Costs

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In this paper we study the sources of wage growth. We identify the contribution to such growth of general, sector specific and firm specific human capital. Our results are interpretable within the context of a model where the returns to human capital may be heterogeneous and where firms may offer different combinations of entry level wages and firm specific human capital development. We allow for the possibility that wages are match specific and that workers move jobs as a result of identifying a better match. To estimate the average returns to experience, sector tenure and firm specific tenure within this context, we develop an identification strategy which relies on the use of firm closures. Our data source is a new and unique administrative data-set for Germany that includes complete work histories as well as individual characteristics. We find positive returns to experience and firm tenure for skilled workers. The returns to experience for unskilled workers are small and insignificant after 2 years of experience. Their returns to sector tenure are also zero. However, their returns to firm tenure are substantial.

Keywords: D91; J24; J31; J41

Journal Article.  13922 words.  Illustrated.

Subjects: Demand and Supply of Labour ; Particular Labour Markets ; Intertemporal Choice and Growth ; Wages, Compensation, and Labour Costs

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