New Key Publication in Econometrica

Their paper ‘Returns to Tenure or Seniority?’ 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 denied 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.

Sebastian Buhai is a TI alumnus (PhD 2008, MPhil 2003) and visiting faculty at Stockholm University, Sweden, Miguel Portela is a TI alumnus (PhD 2007) and an assistant professor at the University of Minho in Portugal, Coen Teulings is a TI fellow, professor in economics at the University of Cambridge, United Kingdom (October 1, 2013) and University of Amsterdam, Aico van Vuuren is a TI fellow and associate professor at VU University Amsterdam.