Tenure and Experience Effects on Wages: A Theory

39 Pages Posted: 14 Oct 2010  

Ken Burdett

University of Pennsylvania - Department of Economics

Melvyn G. Coles

University of Essex - Department of Economics; Autonomous University of Barcelona; IZA Institute of Labor Economics

Date Written: October 13, 2010

Abstract

This paper investigates equilibria in a labor market where firms post wage/tenure contracts and risk-averse workers, both employed and unemployed, search for better paid job opportunities. Different firms typically offer different contracts. Workers accumulate general human capital through learning-by-doing. With on-the-job search, a worker’s wage evolves endogenously over time through experience effects, tenure effects and quits to better paid employment. This equilibrium approach suggests how to identify econometrically between experience and tenure effects on worker wages.

Keywords: experience, tenure, search, equilibrium

JEL Classification: J41

Suggested Citation

Burdett, Ken and Coles, Melvyn G., Tenure and Experience Effects on Wages: A Theory (October 13, 2010). CESifo Working Paper Series No. 3203. Available at SSRN: https://ssrn.com/abstract=1691495

Ken Burdett

University of Pennsylvania - Department of Economics ( email )

3718 Locust Walk
439 McNeil Building
Philadelphia, PA 19104
United States

Melvyn G. Coles (Contact Author)

University of Essex - Department of Economics ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom
+44 1206 873333 (Phone)
+44 1206 872724 (Fax)

Autonomous University of Barcelona

Plaça Cívica
Cerdañola del Valles
Barcelona, Barcelona 08193
SPAIN

IZA Institute of Labor Economics

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

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