Working Paper: CEPR ID: DP17545
Authors: Soren Lethpetersen; Minjoon Lee; Andrew Caplin; Matthew D. Shapiro
Abstract: How worker productivity evolves with tenure and experience is central to economics, shaping, for example, life-cycle earnings and the losses from involuntary job separation. Yet, worker-level productivity is hard to identify from observational data. This paper introduces direct measurement of worker productivity in a firm survey designed to separate the role of on-the-job tenure from total experience in determining productivity growth. Several findings emerge concerning the initial period on the job. (1) On-the-job productivity growth exceeds wage growth, consistent with wages not being allocative period-by-period. (2) Previous experience is a substitute, but a far less than perfect one, for on-the-job tenure. (3) There is substantial heterogeneity across jobs in the extent to which previous experience substitutes for tenure. The survey makes use of administrative data to construct a representative sample of firms, check for selective non-response, validate survey measures with administrative measures, and calibrate parameters not measured in the survey.
Keywords: productivity; tenure; experience; wages; firm survey
JEL Codes: E24; J24; J30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased tenure (C41) | higher productivity (O49) |
| previous experience (C92) | higher productivity (O49) |
| previous experience (C92) | on-the-job tenure (J63) |
| higher productivity (O49) | higher wages (J39) |
| on-the-job tenure (J63) | higher productivity (O49) |
| higher wages (J39) | relevant experience (Y80) |