TY  - JOUR
AU  - Altonji,Joseph G.
AU  - Shakotko,Robert A.
TI  - Do Wages Rise With Job Seniority?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1616
PY  - 1985
Y2  - May 1985
UR  - http://www.nber.org/papers/w1616
L1  - http://www.nber.org/papers/w1616.pdf
N1  - Author contact info:
Joseph G. Altonji
Department of Economics
Yale University
Box 208264
New Haven, CT  06520-8264
Tel: 203/432-6285
Fax: 203/432-5591
E-Mail: joseph.altonji@yale.edu

Robert A. Shakotko
AB  - The extent to which wages rise with the accumulation of seniority(tenure) in a firm after one controls for total labor market experience is a fundamental question about the structure of earnings. A variety of studies have found a large, positive partial effect of tenure on wages. This paper re-examines the evidence using a simple instrumental variables scheme to deal with well known estimation biases which arise from the fact that tenure is likely to be related to unobserved individual and job characteristics affecting the wage. We use the variation of tenure over a given job match as the principal instrumental variable for tenure. The variation intenure over the job, in contrast to variation in tenure across individuals and jobs, is uncorrelated by construction with the fixed individual specific and job match specific components of the error term of the wage equation. Our main findingis that the partial effect of tenure on wages is small, and that general labor market experience and job shopping in the labor market account for most wage growth over a career. The strong cross section relationship between tenure and wages is due primarily to heterogeneity bias.
ER  -