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Tenure Profiles and Efficient Separation in a Stochastic Productivity Model

Ioan Sebastian Buhai and C. N. Teulings ()

No 1997, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper provides a new way of analyzing tenure profiles in wages, by modelling simultaneously the evolution of wages and the distribution of tenures. We develop a theoretical model based on efficient bargaining, where both log outside wage and log wage in the current job follow a random walk, as found empirically. This setting allows the application of real option theory. We derive the efficient separation rule. The model fits the observed distribution of job tenures well. Since we observe outside wages only at job start and job separation, our empirical analysis of within job wage growth is based on expected wage growth conditional on the outside wages at both dates. Our modelling allows testing of the efficient bargaining hypothesis. The model is estimated on the PSID.

Keywords: random productivity growth; efficient bargaining; job tenure; inverse gaussian; wage-tenure profiles; option theory (search for similar items in EconPapers)
JEL-codes: C51 C52 J63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab
Date: 2006-03
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Related works:
Journal Article: Tenure Profiles and Efficient Separation in a Stochastic Productivity Model (2014) Downloads
Working Paper: Tenure Profiles and Efficient Separation in a Stochastic Productivity Model (2013) Downloads
Working Paper: Tenure Profiles and Efficient Separation in a Stochastic Productivity Model (2006) Downloads
Working Paper: Tenure Profiles and Efficient Separation in a Stochastic Productivity Model (2006) Downloads
Working Paper: Tenure Profiles and Efficient Separation in a Stochastic Productivity Model (2006) Downloads
Working Paper: Tenure Profiles and Efficient Separation in a Stochastic Productivity Model (2006) Downloads
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