Interfirm Mobility, Wages, and the Returns to Seniority and Experience in the U.S.
University of California, Los Angeles (UCLA) - Department of Economics; National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST); National Bureau of Economic Research (NBER)
National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE); National Center for Scientific Research (CNRS); Institute for the Study of Labor (IZA)
Center for Research in Economics and Statistics (CREST); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR)
Georgia State University - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)
IZA Discussion Paper No. 1521
CAEPR Working Paper No. 2008-006
Much of the research in labor economics during the 1980s and the early 1990s was devoted to the analysis of changes in the wage structure across many of the world's economies. Only recently, has research turned to the analysis of mobility in its various guises. From the life cycle perspective, decreased wage mobility and increased job instability, makes the phenomenon of increasing wage inequality more severe than it appears to be at first sight. In general, workers' wages may change through two channels: (a) return to their firm-specific human capital (seniority); or (b) inter-firm wage mobility. Our theoretical model gives rise to three equations: (1) a participation equation; (2) a wage equation; and (3) an interfirm mobility equation. In this model the wage equation is estimated simultaneously with the two decision equations. We use the Panel Study of Income Dynamics (PSID) to estimate the model for three education groups. Our main finding is that returns to seniority are quite high for all education groups. On the other hand, the returns to experience appear to be similar to those previously found in the literature.
Number of Pages in PDF File: 63
Date posted: February 23, 2005
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