Working Paper: NBER ID: w0278
Authors: James L. Medoff; Katharine G. Abraham
Abstract: This study provides direct evidence concerning the relationship between experience and performance among managerial and professional employees doing similar work in two major U. S. corporations. The facts presented indicate that while, within grade levels, there is a strong positive association between experience and relative earnings, there is either no association or a negative association between experience and relative rated performance. If we are correct that the performance ratings given to managerial and professional employees in any grade level adequately reflect those employees' relative productivity in the year of assessment, the results imply that the human capital on-the-job training model cannot explain a substantial part of the ob-served return to labor market experience.
Keywords: experience; performance; earnings; human capital; labor market
JEL Codes: J31; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| greater experience (C90) | higher earnings (J31) |
| greater experience (C90) | higher rated performance (D29) |
| higher rated performance (D29) | higher earnings (J31) |
| experience-performance differential (D29) | experience-earnings differential (J31) |
| greater experience (C90) | performance ratings do not mediate relationship with earnings (J33) |