Abstract

http://ssrn.com/abstract=1394351
 
 

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Why Pay Seniority Wages?


Thomas Zwick


University of Wuerzburg - Business Administration & Economics; Centre for European Economic Research (ZEW); Maastricht University - Research Centre for Education and the Labour Market (ROA)

2009

ZEW - Centre for European Economic Research Discussion Paper No. 09-005

Abstract:     
This paper characterises establishments that pay higher seniority wages than their competitors. It tests whether seniority wages are paid on the basis of agency, human capital or efficiency wage considerations. A representative linked employeremployee panel and an innovative two-step estimation strategy are used to first calculate individual seniority wages taking into account that match quality biases tenure effects on wages. Then individual seniority wages are aggregated to the establishment level. Finally, the seniority wage indicator is explained by establishment characteristics. This contribution shows that large, profitable and establishments with a highly qualified workforce pay high seniority wages. Also collective bargaining coverage and works councils have a positive impact and the share of foreigners, training intensity and initial wage levels have a negative correlation with seniority wages. The results support an agency based motivation for seniority wages.

Number of Pages in PDF File: 33

Keywords: Seniority Wages, Establishment Characteristics, Linked Employer-Employee Data

JEL Classification: J14, J21, J31

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Date posted: April 25, 2009  

Suggested Citation

Zwick, Thomas, Why Pay Seniority Wages? (2009). ZEW - Centre for European Economic Research Discussion Paper No. 09-005. Available at SSRN: http://ssrn.com/abstract=1394351 or http://dx.doi.org/10.2139/ssrn.1394351

Contact Information

Thomas Zwick (Contact Author)
University of Wuerzburg - Business Administration & Economics ( email )
Sanderring 2
Wuerzburg, D-97070
Germany
Centre for European Economic Research (ZEW) ( email )
P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany
Maastricht University - Research Centre for Education and the Labour Market (ROA) ( email )
P.O. Box 616
Maastricht, MD6200
Netherlands
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