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The Effects of Labor Market Experience, Job Seniority and Job Mobility on Wage Growth

Posted: 8 Jul 1998  

Joseph G. Altonji

Yale University - Economic Growth Center; National Bureau of Economic Research (NBER); Yale University - Cowles Foundation

Nicolas Williams III

University of Cincinnati - McMicken College of Arts and Sciences - Department of Economics

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Abstract

This paper studies the returns to seniority, the returns to experience, and the effects of seniority and experience at the time of a quit or layoff on changes in the job match specific component of wages. We show that these returns are not identified in widely used regression models that relate the wage changes of stayers, quits, and layoffs to tenure and experience. We deal with the identification problem by using Geweke's (1986) Bayes procedure to combine the sample information with prior information about inequalities that the parameters must satisfy. We derive two of the inequalities from a simple model of wages and mobility, which we use to argue that the relationship between the change in the job match component and tenure at the time of a quit (layoff) will be positive (negative). We use two other inequalities that state that there is at least a small return to 30 years of experience and that persons who are laid off with substantial seniority suffer a fall in the job match specific component of wages. We find that the return to tenure is probably above Altonji and Shakotko's (1987) estimate for an earlier sample period but well below OLS estimates. We also find that there is a large return to general labor market experience that is independent of job shopping.

JEL Classification: J3

Suggested Citation

Altonji, Joseph G. and Williams, Nicolas, The Effects of Labor Market Experience, Job Seniority and Job Mobility on Wage Growth. Research in Labor Economics, Vol. 17, 1998. Available at SSRN: https://ssrn.com/abstract=105548

Joseph G. Altonji (Contact Author)

Yale University - Economic Growth Center ( email )

Box 208269
New Haven, CT 06520-8269
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Nicolas Williams III

University of Cincinnati - McMicken College of Arts and Sciences - Department of Economics ( email )

1202 Crosley
P.O. Box 210371
Cincinnati, OH 45221-0371
United States
513-556-2390 (Phone)
513-556-2669 (Fax)

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