Returns to tenure or seniority?
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Authors
Buhai, IS
Portela, MA
Teulings, CN
van Vuuren, A
Abstract
This study documents two empirical facts using matched employer–employee data for Denmark and Portugal. First, workers who are hired last, are the first to leave the firm. Second, workers' wages rise with seniority, where seniority is defined as a worker's tenure relative to the tenure of his colleagues. Controlling for tenure, the probability of a worker leaving the firm decreases with seniority. The increase in expected seniority with tenure explains a large part of the negative duration dependence of the separation hazard. Conditional on ten years of tenure, the wage differential between the 10th and the 90th percentiles of the seniority distribution is 1.1–1.4 percentage points in Denmark and 2.3–3.4 in Portugal.
Description
Keywords
Wage dynamics, tenure, seniority, last-in-first-out
Journal Title
Econometrica
Conference Name
Journal ISSN
0012-9682
1468-0262
1468-0262
Volume Title
82
Publisher
The Econometric Society
Publisher DOI
Sponsorship
Buhai acknowledges financial support provided through the European Commission FP7 Marie Curie IOF, Grant PIOF-GA-2009-255597. Portela acknowledges financial support provided by the Portuguese Foundation for Science and Technology, Grant SFRH/BD/5114/2001.