Resource title

Tenure profiles and efficient separation in a stochastic productivity model

Resource image

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Resource description

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.

Resource author

I. Sebastian Buhai, Coen N. Teulings

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/19152

Resource license

Adapt according to the presented license agreement and reference the original author.