Returns to Type or Tenure?

36 Pages Posted: 16 May 2007

See all articles by Roland Amann

Roland Amann

University of Konstanz

Tobias J. Klein

Tilburg University - Department of Econometrics & Operations Research; Tilburg University - Center for Economic Research (CentER); IZA Institute of Labor Economics; Netspar; Tilburg Law and Economics Center (TILEC)

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Date Written: May 2007

Abstract

We analyze the joint determination of wage levels, wage growth and firm tenure. Our analysis is built on estimating a reduced form for tenure, a structural wage level equation and a structural wage growth equation. We disentangle returns to a latent type variable from estimates of general returns to tenure and wage gains from job changes. This type is related to unobservable match quality that is allowed to vary over time and to be correlated with the returns to tenure. The obtained results for Germany indicate that the type plays a crucial role in the remuneration of employees. Those types who change jobs more often obtain steeper wage profiles but earn less on average.

Keywords: wage growth, returns to tenure, unobserved heterogeneity, control function approach, nonseparable model

JEL Classification: J31

Suggested Citation

Amann, Roland and Klein, Tobias J., Returns to Type or Tenure? (May 2007). IZA Discussion Paper No. 2773, Available at SSRN: https://ssrn.com/abstract=986325 or http://dx.doi.org/10.2139/ssrn.986325

Roland Amann

University of Konstanz ( email )

Fach D-144
Universitätsstraße 10
Konstanz, D-78457
Germany

Tobias J. Klein (Contact Author)

Tilburg University - Department of Econometrics & Operations Research ( email )

Tilburg, 5000 LE
Netherlands

HOME PAGE: http://center.uvt.nl/staff/klein/index.html

Tilburg University - Center for Economic Research (CentER)

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

IZA Institute of Labor Economics ( email )

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

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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