NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Tenure and Output

Kathryn Shaw, Edward P. Lazear

NBER Working Paper No. 13652
Issued in November 2007
NBER Program(s):   LS   PR

A key tenet of the theory of human capital is that investment in skills results in higher productivity. The previous literature has estimated the degree of investment in human capital for individuals by looking at individual wage growth as a proxy for productivity growth. In this paper, we have both wage and personal productivity data, and thus are able to measure of the increase in workers' output with tenure. The data is from an autoglass company. Most of production occurs at the individual level so measures of output are clear. We find a very steep learning curve in the year on the job: output is 53 percent higher after one year than it is initially when hired. These output gains with tenure are not reflected in equal percentage pay gains: pay profiles are much flatter than output profiles in the first year and a half on the job. For these data, using wage profiles significantly underestimates the amount of investment compared to the gains evident in output-tenure profiles. The pattern of productivity rising more rapidly than pay reverses after two years of tenure. Worker selection is also important. Workers who stay longer have higher output levels and faster early learning.

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Document Object Identifier (DOI): 10.3386/w13652

Published: Shaw, Kathryn & Lazear, Edward P., 2008. "Tenure and output," Labour Economics, Elsevier, vol. 15(4), pages 704-723, August. citation courtesy of

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