Interfirm Mobility, Wages, and the Returns to Seniority and Experience in the U.S

Moshe Buchinsky (), Denis Fougere, Francis Kramarz () and Rusty Tchernis
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Moshe Buchinsky: UCLA, CREST-INSEE and NBER

No 2008-006, CAEPR Working Papers from Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington

Abstract: In this paper, we follow on the seminal work of Altonji and Shakotko (1987) and Topel (1991) and reinvestigate the returns to seniority in the U.S. These papers specify a wage function, in which workers’ wages can change through two channels: (a) returns to their seniority; and (b) returns to their labor market experience. We start from the same wage equation as in previous studies, and, following our theoretical model, we explicitly include a participation-employment equation and an interfirm mobility equation. The employment and mobility decisions define the individual’s experience and seniority. Because experience and seniority are fully endogenized, we introduce into the wage equation a summary of the workers’ entire career and past jobs. The three-equation system is estimated simultaneously using the Panel Study of Income Dynamics (PSID). For all three education groups that we study, returns to seniority are quite high, even higher than what was previously obtained by Topel. On the other hand, the returns to experience appear to be similar to those previously found in the literature.

Keywords: wage mobility; interfirm mobility; returns to seniority; panel data; Markov Chain; Monte Carlo methods (search for similar items in EconPapers)
JEL-codes: C11 C15 J31 J63 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2008-04
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Related works:
Working Paper: Interfirm Mobility, Wages, and the Returns to Seniority and Experience in the U.S (2005)
Working Paper: Interfirm Mobility, Wages and the Returns to Seniority and Experience in the U.S (2002)
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