Tenure and Output

33 Pages Posted: 3 Dec 2007 Last revised: 6 Feb 2008

See all articles by Kathryn L. Shaw

Kathryn L. Shaw

Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Edward P. Lazear

Stanford Graduate School of Business; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: November 2007

Abstract

A key tenet of the theory of human capital is that investment in skills results in higher productivity. The previous literature has estimated the degree of investment in human capital for individuals by looking at individual wage growth as a proxy for productivity growth. In this paper, we have both wage and personal productivity data, and thus are able to measure of the increase in workers' output with tenure. The data is from an autoglass company. Most of production occurs at the individual level so measures of output are clear. We find a very steep learning curve in the year on the job: output is 53 percent higher after one year than it is initially when hired. These output gains with tenure are not reflected in equal percentage pay gains: pay profiles are much flatter than output profiles in the first year and a half on the job. For these data, using wage profiles significantly underestimates the amount of investment compared to the gains evident in output-tenure profiles. The pattern of productivity rising more rapidly than pay reverses after two years of tenure. Worker selection is also important. Workers who stay longer have higher output levels and faster early learning.

Suggested Citation

Shaw, Kathryn L. and Lazear, Edward P., Tenure and Output (November 2007). NBER Working Paper No. w13652. Available at SSRN: https://ssrn.com/abstract=1043342

Kathryn L. Shaw (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Edward P. Lazear

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-9136 (Phone)
650-723-0498 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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