Early Starters versus Late Beginners

Pierre‐Andre Chiappori, Bernard Salanie, Julie Valentin
1999 Journal of Political Economy  
We consider a model of wage formation characterized by two features: learning and downward rigidity. We show that wages should exhibit a late-beginner property: when one controls for the wage at date t, the wage at date t 1 should be negatively correlated with the wage at date t 1. We test this property on a sample of about 1,000 executives of a French state-owned firm whose careers we observe for 15 years. This organization exhibits the features that characterize internal labor markets; in
more » ... icular, careers consist of sequences of discrete promotions, a fact that generates specific econometric problems. The results confirm the prediction.
doi:10.1086/250077 fatcat:u6npi62c4zaqhg53btrikhxgry