Wage Premia for Newly Hired Employees: Theory and Evidence

38 Pages Posted: 1 Mar 2011

See all articles by Patrick Kampkötter

Patrick Kampkötter

University of Tuebingen - Department of Managerial Accounting

Dirk Sliwka

University of Cologne - Department of Business Administration and Human Resource Management; IZA Institute of Labor Economics

Abstract

We investigate wage differences between newly hired and incumbent employees. We show in a formal model that when employees care for wages as well as match-specific utility, incumbents earn less than new recruits if and only if firm-specific human capital is not too important. The existence and structure of these wage premia is then investigated empirically using detailed personnel data from a large number of banks. We find that, on average, new hires earn more than comparable incumbent colleagues on the same job. But the size of the wage premia varies between jobs and indeed strongly depends on a measure of human capital specificity.

Keywords: wages, job mobility, wage premia, human capital, new hires

JEL Classification: J31, J44, J62

Suggested Citation

Kampkötter, Patrick and Sliwka, Dirk, Wage Premia for Newly Hired Employees: Theory and Evidence. IZA Discussion Paper No. 5538. Available at SSRN: https://ssrn.com/abstract=1771260

Patrick Kampkötter (Contact Author)

University of Tuebingen - Department of Managerial Accounting ( email )

Germany

Dirk Sliwka

University of Cologne - Department of Business Administration and Human Resource Management ( email )

Koln, 50923
Germany

IZA Institute of Labor Economics

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

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