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Author Buhai, Sebastian ♦ Portela, Miguel ♦ Teulings, Coen ♦ Vuuren, Aico Van ♦ Jel-Codes J., J.
Source CiteSeerX
Content type Text
File Format PDF
Subject Domain (in DDC) Computer science, information & general works ♦ Data processing & computer science
Subject Keyword Seniority Rank ♦ Labor Protection ♦ Non-determined Fashion ♦ Firing Rule ♦ First Country ♦ Large Number ♦ Strong Rela-tionship ♦ Senior Worker ♦ Matched Employer-employee Data ♦ Empirical Analysis ♦ Industry Sector ♦ Internal Labor Market ♦ Negative Impact ♦ Firm-specific Investment ♦ Seniority Hierarchy ♦ Seniority Rank Pattern ♦ Bargaining Power ♦ Job Tenure ♦ Relative Position ♦ Adverse-selection Model ♦ Empirical Re-search ♦ Current Job ♦ Continuous Function ♦ Senior Colleague ♦ Observed Return ♦ United State ♦ Insider-outsider Market
Abstract A large number of studies have investigated why more senior workers tend to be paid higher wages than their less senior colleagues. Most empirical re-search in this area has focused on job tenure as a continuous function of the time spent in the current job. This specification can be defended by theories of firm-specific investment, efficiency-wages or adverse-selection models. However, rent extracting arguments, as suggested by the theory of internal labor markets, indicate that the relative position of the worker in the seniority hierarchy of the firm, ie. her "seniority rank", may also explain part of the observed returns to tenure. We explore this idea in our paper. Both seniority and seniority rank are included in the empirical analysis. Although there is a strong rela-tionship between the time spent in a job and the seniority rank, identification is not problematic since the seniority rank always jumps discontinuously in a non-determined fashion, while seniority is by definition time-continuous. We use matched employer-employee data from Denmark and Portugal. The first country is similar in terms of labor protection to the United States, while the second has much stricter firing rules. We find a significant and negative impact of the seniority rank on wages, in both countries. We also verify that labor protection increases the bargaining power of individuals with a lower seniority rank, as predicted by theories on unionized and insider-outsider markets. Dif-ferences between industry sectors in terms of seniority rank patterns are similar in in the two countries analyzed.
Educational Role Student ♦ Teacher
Age Range above 22 year
Educational Use Research
Education Level UG and PG ♦ Career/Technical Study