RETURN TO EXPERIENCE AND INITIAL WAGE LEVEL: DO LOW WAGE WORKERS CATCH UP?
Article first published online: 29 AUG 2013
Copyright © 2013 John Wiley & Sons, Ltd.
Journal of Applied Econometrics
Volume 29, Issue 6, pages 984–1006, September/October 2014
How to Cite
2014), RETURN TO EXPERIENCE AND INITIAL WAGE LEVEL: DO LOW WAGE WORKERS CATCH UP?, J. Appl. Econ., 29, 984–1006, doi: 10.1002/jae.2346, and (
- Issue published online: 8 OCT 2014
- Article first published online: 29 AUG 2013
- Manuscript Revised: 11 JUN 2013
- Manuscript Received: 4 JAN 2012
This paper estimates the relationship between initial wage and return to experience. We use a Mincer-like wage model to non-parametrically estimate this relationship allowing for an unobservable individual permanent effect in wages and unobservable individual return to experience. The relationship between return to experience and unobservable individual ability is negative when conditioning on educational attainment, while the relationship between return to experience and educational attainment is positive. We link our findings to three main theories of wage growth, namely search, unobserved productivity and learning, and human capital. We devise several empirical tests in order to separate the theories. We find evidence in favor of the unobserved productivity and learning model and mixed evidence regarding the search model. We find no evidence in support of the human capital model. Copyright © 2013 John Wiley & Sons, Ltd.