Do Initial Conditions Persist between Firms?

Till von Wachter and Stefan Bender

in The Analysis of Firms and Employees

Published by University of Chicago Press

Published in print December 2008 | ISBN: 9780226042879
Published online February 2013 | e-ISBN: 9780226042893 | DOI:
Do Initial Conditions Persist between Firms?

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  • Econometrics and Mathematical Economics


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An increasing number of studies suggest that the starting conditions in the first year of a worker's job or labor market entry can have long-term effects on earnings and career development. Using data on the complete career histories of all workers in a large manufacturing sector in Germany, this chapter examines the prevalence and heterogeneity of firm-entry cohort effects for a large sample of firms over more than twenty years. To ensure that the cohort differences in wages are not due to selective entry of workers into firms, the chapter controls for observable firm and worker characteristics as well as worker fixed effects. In addition, it analyzes whether entry conditions fade within firms and whether firms' wages tend to converge to a common market wage over time. The chapter also looks at the effects of job displacement on wage changes for workers with high, medium, or low starting wages at the lost job. Finally, it discusses the impact of past wage premiums on the level of wages after job loss.

Keywords: labor market entry; earnings; career development; Germany; workers; firms; wages; job loss; job displacement

Chapter.  10807 words.  Illustrated.

Subjects: Econometrics and Mathematical Economics

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