Working Paper: NBER ID: w30342
Authors: Andrew Caplin; Minjoon Lee; Sren Lethpetersen; Johan Saeverud; 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. A key innovation is to elicit what managers know about the productivity of their workers. 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: worker productivity; wages; tenure; experience; labor economics
JEL Codes: J24; J30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| on-the-job productivity growth (O49) | wage growth (J31) |
| prior experience (D80) | productivity growth (O49) |
| tenure (M51) | productivity growth (O49) |
| wage dynamics (J31) | productivity dynamics (O49) |
| tenure (M51) | maximal productivity (E23) |
| productivity returns to tenure (J24) | wage returns (J31) |