The Effects of Labor Market Experience, Job Seniority, and Job Mobility on Wage Growth

Joseph G. Altonji, Nicolas Williams

NBER Working Paper No. 4133
Issued in August 1992
NBER Program(s):LS

This paper studies the returns to seniority, the returns to experience,

and the effects of seniority and experience at the time of a quit or layoff on

changes in the job match specific component of wages. We show that these

returns are not identified in widely used regression models that relate the wage

changes of stayers, quits, and layoffs to tenure and experience. We deal with

the identification of problems in two ways. First, we obtain theoretical bounds

on key unidentified parameters using a simple model of wages and mobility.

Second, we check the implications of assumptions about the linear tenure slope

for the estimates of the returns to tenure, experience, and the effect of tenure

on job match gains. We have three main empirical findings. First, there is a

large return to general labor market experience that is independent of job

shopping. Second, the return to tenure is probably above the Altonji and

Shakotko's (1987) estimate but far below OLS estimates. Third, quits results

in substantial job match gains for inexperienced workers. Layoffs are

associated with the substantial job match losses for workers who have been on

the job for over a year.

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Document Object Identifier (DOI): 10.3386/w4133

Published: Altonji, Joseph G. and Nicolas Williams. "The Effects of Labor Market Experience, Job Seniority and Mobility on Wage Growth." Research in Labor Economics 17 (1998): 233-276.

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