Download this Paper Open PDF in Browser

Why Pay Seniority Wages?

33 Pages Posted: 25 Apr 2009  

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)

Date Written: 2009

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.

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

JEL Classification: J14, J21, J31

Suggested Citation

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

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

Paper statistics

Downloads
103
Rank
220,256
Abstract Views
1,041