Return to Experience and Initial Wage Level: Do Low Wage Workers Catch Up?

Kenneth Sørensen and Rune Vejlin

Economics Working Papers from Department of Economics and Business Economics, Aarhus University

Abstract: This paper estimates the relationship between initial wage and return to experience. We use a Mincer-like wage model to nonparametrically estimate this relationship allowing for an unobservable individual permanent effect in wages and unobservable individual return to experience. The relationship between return to experience and unobservable individual ability is negative when conditioning on educational attainment while the relationship between return to experience and educational attainment is positive. We link our finding to two main theories of wage growth, namely search and human capital. We are able to test if search frictions are the main driver of the negative relationship, but we find this is not the case.

Keywords: Wage growth; initial wage; return to experience; nonparametric estimation (search for similar items in EconPapers)
JEL-codes: J24 J3 (search for similar items in EconPapers)
Pages: 31
Date: 2012-01-04
New Economics Papers: this item is included in nep-lab and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://repec.econ.au.dk/repec/afn/wp/12/wp12_02.pdf (application/pdf)

Related works:
Journal Article: RETURN TO EXPERIENCE AND INITIAL WAGE LEVEL: DO LOW WAGE WORKERS CATCH UP? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:aah:aarhec:2012-02

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