Returns to type or tenure?

R. Amann, T.J. Klein

Research output: Contribution to journalArticleScientificpeer-review

Abstract

A regression of wages on firm tenure is likely to yield biased estimates of the returns to tenure because tenure and wages are confounded by unobserved attributes of the job and the unobserved quality of the match between the firm and the employee. Previously, the within-job variation in tenure has been used as an instrument to estimate the average returns to tenure. We propose to use instead an easy-to-implement control function estimator for the returns to tenure and their dependence on unobserved heterogeneity. The results obtained for Germany indicate that there is a substantial amount of unobserved heterogeneity in the returns to tenure and that good job matches are characterized by higher returns to tenure in the first 5 years and lower returns thereafter.
Original languageEnglish
Pages (from-to)153-166
JournalJournal of the Royal Statistical Society, Series A
Volume175
Issue number1
DOIs
Publication statusPublished - 2012

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Unobserved Heterogeneity
Wages
Control Function
Estimate
Biased
Regression
Likely
Attribute
Estimator
wage
firm
Tenure
employee
regression
Business

Cite this

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title = "Returns to type or tenure?",
abstract = "A regression of wages on firm tenure is likely to yield biased estimates of the returns to tenure because tenure and wages are confounded by unobserved attributes of the job and the unobserved quality of the match between the firm and the employee. Previously, the within-job variation in tenure has been used as an instrument to estimate the average returns to tenure. We propose to use instead an easy-to-implement control function estimator for the returns to tenure and their dependence on unobserved heterogeneity. The results obtained for Germany indicate that there is a substantial amount of unobserved heterogeneity in the returns to tenure and that good job matches are characterized by higher returns to tenure in the first 5 years and lower returns thereafter.",
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Returns to type or tenure? / Amann, R.; Klein, T.J.

In: Journal of the Royal Statistical Society, Series A, Vol. 175, No. 1, 2012, p. 153-166.

Research output: Contribution to journalArticleScientificpeer-review

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AU - Klein, T.J.

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AB - A regression of wages on firm tenure is likely to yield biased estimates of the returns to tenure because tenure and wages are confounded by unobserved attributes of the job and the unobserved quality of the match between the firm and the employee. Previously, the within-job variation in tenure has been used as an instrument to estimate the average returns to tenure. We propose to use instead an easy-to-implement control function estimator for the returns to tenure and their dependence on unobserved heterogeneity. The results obtained for Germany indicate that there is a substantial amount of unobserved heterogeneity in the returns to tenure and that good job matches are characterized by higher returns to tenure in the first 5 years and lower returns thereafter.

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