Tenure profiles and efficient separation in a stochastic productivity model

Arbeitspapier

This paper provides a new way of analyzing tenure profiles in wages, by modelling simultaneously the evolution of wages and the distribution of tenures. We develop a theoretical model based on efficient bargaining, where both log outside wage and log wage in the current job follow a random walk, as found empirically. This setting allows the application of real option theory. We derive the efficient separation rule. The model fits the observed distribution of job tenures well. Since we observe outside wages only at job start and job separation, our empirical analysis of within job wage growth is based on expected wage growth conditional on the outside wages at both dates. Our modelling allows testing of the efficient bargaining hypothesis. The model is estimated on the PSID.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 1997

Classification and Topics

• Classification: Wirtschaft ; Model Construction and Estimation ; Model Evaluation, Validation, and Selection ; Labor Turnover; Vacancies; Layoffs
• Subject: random prodictivity growth ; efficient bargaining ; job tenure ; inverse gaussian ; wage-tenure profiles ; option theory ; Betriebszugehörigkeit ; Lohn ; Erwerbsverlauf ; Verhandlungstheorie ; Realoption

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Buhai, I. Sebastian ; Teulings, Coen N.
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/33334
• Last update: 10.03.2025, 11:45 AM CET