EconPapers    
Economics at your fingertips  
 

Returns to Tenure or Seniority?

Ioan Sebastian Buhai, Miguel Portela (), C. N. Teulings () and Aico van Vuuren ()

No 2381, CESifo Working Paper Series from CESifo Group Munich

Abstract: This study documents two empirical regularities, using data for Denmark and Portugal. First, workers who are hired last, are the first to leave the firm (Last In, First Out; LIFO). Second, workers’ wages rise with seniority (= a worker’s tenure relative to the tenure of her colleagues). We seek to explain these regularities by developing a dynamic model of the firm with stochastic product demand and hiring cost (= irreversible specific investments). There is wage bargaining between a worker and its firm. Separations (quits or layoffs) obey the LIFO rule and bargaining is efficient (a zero surplus at the moment of separation). The LIFO rule provides a stronger bargaining position for senior workers, leading to a return to seniority in wages. Efficiency in hiring requires the workers’ bargaining power to be in line with their share in the cost of specific investment, Then, the LIFO rule is a way to protect their property right on the specific investment. We consider the effects of Employment Protection Legislation and risk aversion.

Keywords: irreversible investment; efficient bargaining; seniority; LIFO; matched employer-employee data; EPL (search for similar items in EconPapers)
JEL-codes: J31 J41 J63 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11) Track citations by RSS feed

Downloads: (external link)
https://www.cesifo-group.de/DocDL/cesifo1_wp2381.pdf (application/pdf)

Related works:
Journal Article: Returns to Tenure or Seniority? (2014) Downloads
Working Paper: Returns to Tenure or Seniority (2013) Downloads
Working Paper: Returns to Tenure or Seniority? (2008) Downloads
Working Paper: Returns to Tenure or Seniority? (2008) Downloads
Working Paper: Returns to Tenure or Seniority? (2008) Downloads
Working Paper: Returns to Tenure or Seniority? (2008) Downloads
Working Paper: Returns to Tenure or Seniority? (2008) Downloads
Working Paper: Returns to Tenure or Seniority? (2008) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_2381

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Group Munich Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().

 
Page updated 2019-08-13
Handle: RePEc:ces:ceswps:_2381