Early Starters Versus Late Beginners
Journal of Political Economy, Vol. 107, No. 4, August 1999
Posted: 18 Nov 1999
Abstract
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 particular, careers consist of sequences of discrete promotions, a fact that generates specific econometric problems. The results confirm the prediction.
JEL Classification: J31
Suggested Citation: Suggested Citation