Tenure Profiles and Efficient Separation in a Stochastic Productivity Model

C. N. Teulings () and Ioan Sebastian Buhai

No 7, Discussion Papers from Central European Labour Studies Institute (CELSI)

Abstract: We develop a theoretical model based on efficient bargaining, where both log outside productivity and log productivity in the current job follow a random walk. This setting allows the application of real option theory. We derive the efficient worker-firm separation rule. We show that wage data from completed job spells are uninformative about the true tenure profile. The model is estimated on the PSID. It fits the observed distribution of job tenures well. Selection of favourable random walks can account for the concavity in tenure profiles. About 80% of the estimated wage returns to tenure is due to selectivity in the realized outside productivities.

Keywords: random productivity growth; efficient bargaining; job tenure; inverse gaussian; wage-tenure profiles; option theory (search for similar items in EconPapers)
JEL-codes: C33 C41 J31 J63 (search for similar items in EconPapers)
Date: 2013-05-28
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Related works:
Working Paper: Tenure Profiles and Efficient Separation in a Stochastic Productivity Model (2006)
Working Paper: Tenure Profiles and Efficient Separation in a Stochastic Productivity Model (2006)
Working Paper: Tenure Profiles and Efficient Separation in a Stochastic Productivity Model (2006)
Working Paper: Tenure Profiles and Efficient Separation in a Stochastic Productivity Model (2006)
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