The Returns to Seniority in France (and Why are They Lower than in the United States?)

55 Pages Posted: 18 May 2006

See all articles by Francis Kramarz

Francis Kramarz

Independent

Magali Beffy

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST); Institute for the Study of Labor (IZA)

Moshe Buchinsky

University of California, Los Angeles (UCLA) - Department of Economics; National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST); National Bureau of Economic Research (NBER)

Denis Fougère

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE); National Center for Scientific Research (CNRS); IZA Institute of Labor Economics

Thierry Kamionka

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE) ; National Center for Scientific Research (CNRS)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2006

Abstract

We estimate a model of the joint participation and mobility along with the individuals' wage formation in France. Our model makes it possible to distinguish between unobserved person heterogeneity and state-dependence. We estimate the model using state of the art Bayesian methods employing a long panel (1976-1995) for France. Our results clearly show that returns to seniority are small, and for some education groups are close to zero. The specification here is the same as that used in Buchinsky, Fougère, Kramarz and Tchernis (2002) for the case of the United States, where the returns to seniority were found to be quite large. This result also holds when using the method employed by Altonji and Williams (1992) for both countries. It turns out that differences between the two countries relate to firm-to-firm mobility. Using a model of Burdett and Coles (2003), we explain the rationale for this phenomenon. Specifically, in a low-mobility country such as France, there is little gain in compensating workers for long tenures because they tend to stay in the firm for most, if not all, of their career. This is true even in cases where individuals clearly possess substantial amount of firm-specific human capital. In contrast, for a high-mobility country such as the United States, high returns to seniority have a clear incentive effect, and firms are induced to pay the premium associated with firm-specific human capital to avoid losing their most productive workers.

Keywords: Participation, wage, job mobility, returns to seniority, returns to experience, individual effects

JEL Classification: J24, J31, J63

Suggested Citation

Kramarz, Francis and Beffy, Magali and Buchinsky, Moshe and Fougere, Denis and Kamionka, Thierry, The Returns to Seniority in France (and Why are They Lower than in the United States?) (January 2006). CEPR Discussion Paper No. 5486, Available at SSRN: https://ssrn.com/abstract=903176

Magali Beffy

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

Institute for the Study of Labor (IZA)

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Moshe Buchinsky

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Los Angeles, CA 90095-1477
United States

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Denis Fougere

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE) ( email )

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+33 1 4117 7713 (Phone)
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National Center for Scientific Research (CNRS)

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France

IZA Institute of Labor Economics

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Bonn, D-53072
Germany

Thierry Kamionka

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE) ( email )

15, Boulevard Adolphie PINARD
92245 Malakoff Cedex
France

National Center for Scientific Research (CNRS)

3, rue Michel-Ange
Paris cedex 16, 75794
France

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