Discussion paper

DP2077 Wages, Experience and Seniority

This paper develops and estimates a human capital model of wage growth based
on learning by doing. Learning by doing rates are assumed to be
heterogeneous and firms offer different career structures in terms of the
rate of acquisition of firm specific human capital. The model is estimated
using a unique data set drawn from German administrative records and
including a complete employment and earnings history for each worker in our
sample. We find evidence of increased labour market attachments for
individuals with higher returns to experience. This has important
implications for the estimates. The estimated returns to experience are
2.7% a year. The returns to tenure are close to zero. Crucial identifying
information is provided by plant closures.


Meghir, C and C Dustmann (1999), ‘DP2077 Wages, Experience and Seniority‘, CEPR Discussion Paper No. 2077. CEPR Press, Paris & London. https://cepr.org/publications/dp2077