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Tenure Profiles and Efficient Separation in a Stochastic Productivity Model
Stockholm University, Faculty of Social Sciences, Department of Economics.
2014 (English)In: Journal of business & economic statistics, ISSN 0735-0015, E-ISSN 1537-2707, Vol. 32, no 2, 245-258 p.Article in journal (Refereed) Published
Abstract [en]

We develop a theoretical model based on efficient bargaining, where both log outside productivity and log productivity in the current job follow a random walk. This setting allows the application of real option theory. We derive the efficient worker-firm separation rule. We show that wage data from completed job spells are uninformative about the true tenure profile. The model is estimated on the Panel Study of Income Dynamics. It fits the observed distribution of job tenures well. Selection of favorable random walks can account for the concavity in tenure profiles. About 80% of the estimated wage returns to tenure is due to selectivity in the realized outside productivities.

Place, publisher, year, edition, pages
2014. Vol. 32, no 2, 245-258 p.
Keyword [en]
Efficient bargaining, Inverse Gaussian, Job tenure, Option theory, Random productivity growth, Wage-tenure profiles
National Category
Economics and Business
URN: urn:nbn:se:su:diva-104563DOI: 10.1080/07350015.2013.866568ISI: 000335287500020OAI: diva2:724441


Available from: 2014-06-12 Created: 2014-06-11 Last updated: 2014-06-12Bibliographically approved

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Buhai, I. Sebastian
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