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Retrieving the Returns to Experience, Tenure, and Job Mobility from Work Histories

Pedro Raposo
John T. Addison
Publication Year 
JEL Code 
C23 - Models with Panel Data
J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc.
J63 - Turnover; Vacancies; Layoffs
Using a unique linked employer-employee dataset Portuguese dataset, the Quadros de Pessoal, 1986-2020, this paper offers an extension of the standard Mincerian model of wage determination by allowing for different returns to experience and tenure in the sequence of jobs that constitute a career of up to ten jobs. In addition to such heterogeneity, we also allow for the possibility of a distinct wage hike each time workers change jobs. We report that workers achieve the highest returns to experience on the second job. For its part, the returns to tenure are sizable, most notably on the first job. The sequence of wage uplifts attendant upon job changes reflects the returns to job search investments over the life cycle. They shape the curvature of the earnings profile, with the returns to job mobility tending to decline over the sequence of jobs. Further, the ability to distinguish the order of the jobs held by the worker enabled us to disentangle the returns to experience from those to tenure in a model with a job match fixed effects in a more satisfactory manner than the conventional routes followed in the literature. In a final application, we investigate how worker, firm, and job match heterogeneity influence the returns to mobility, experience, and tenure. The returns to job mobility were found to partially reflect sorting into better job matches and into firms offering more generous wage policies. Also, the estimated returns to experience are upwardly biased because more productive worker tend to be more experienced. However, none of the three components of the job match fixed effect had a clear impact on the returns to tenure.
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