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AbstractThe human capital earnings function is part of the toolbox of labour economists. Returns to labour market experience are interpreted as returns to general human capital, and returns to job tenure as returns to job-specific human capital. There is, however, an awareness that there are other models capable of explaining these correlations, notably a search or ''job-shopping'' model and a number of papers have attempted to distinguish the two hypotheses using mostly data on wage growth for job-stayers and movers. The results have been mixed. This paper takes a different approach to the same issue. It shows how a simple search model can be used to predict the nature of the relationship between wages, experience and tenure if one has data on labour market transition rates. This is what is done in this paper using data from the UK Labour Force Survey. The conclusions are that while part of the returns to experience can be explained by the search model, there is a substantial part that must be interpreted as a ''true'' return to experience. In contrast, we show how the search model over-predicts the returns to tenure and the data seem broadly consistent with a model in which the ''true'' returns to tenure are close to zero.
Suggested Citation
Manning, Alan, 1998.
"Mighty good thing: the returns to tenure,"
LSE Research Online Documents on Economics
20291, London School of Economics and Political Science, LSE Library.
Handle:
RePEc:ehl:lserod:20291
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References listed on IDEAS
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Cited by:
- Cornelia Luchsinger & Rafael Lalive & Jörg Wild, 2003.
"Do Wages Rise with Job Seniority? The Swiss Case,"
Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 139(II), pages 207-229, June.
- Alan Manning & Joanna Swaffield, 2008.
"The gender gap in early-career wage growth,"
Economic Journal, Royal Economic Society, vol. 118(530), pages 983-1024, July.
- Manning, Alan & Swaffield, Joanna, 2005.
"The gender gap in early career wage growth,"
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19883, London School of Economics and Political Science, LSE Library.
- Alan Manning & Joanna Swaffield, 2005.
"The Gender Gap in Early Career Wage Growth,"
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dp0700, Centre for Economic Performance, LSE.
- Piekkola, Hannu & Böckerman, Petri, 2002.
"On Whom Falls the Burden of Restructuring? Evidence from Finland,"
Discussion Papers
714, The Research Institute of the Finnish Economy.
- Piekkola, Hannu, 2002.
"Transferability of Human Capital and Job Switches,"
Discussion Papers
794, The Research Institute of the Finnish Economy.
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More about this item
JEL classification:
- R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
- J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
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