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Returns to seniority or tenure?

Autori: Buhai, I.S., M. A., Portela, C.N. Teulings, and A. van Vuuren

Editorial: Econometrica, 82 (2), p.705-730, 2014.


This study documents two empirical facts using matched employer–employee data
for Denmark and Portugal. First, workers who are hired last, are the first to leave the
firm. Second, workers’ wages rise with seniority, where seniority is defined as a worker’s
tenure relative to the tenure of his colleagues. Controlling for tenure, the probability of
a worker leaving the firm decreases with seniority. The increase in expected seniority
with tenure explains a large part of the negative duration dependence of the separation
hazard. Conditional on ten years of tenure, the wage differential between the 10th
and the 90th percentiles of the seniority distribution is 1.1–1.4 percentage points in
Denmark and 2.3–3.4 in Portugal.