This paper develops and estimates a human capital model of wage growth based on learning by doing. Learning by doing rates are assumed to be heterogeneous and firms offer different career structures in terms of the rate of acquisition of firm specific human capital. The model is estimated using a unique data set drawn from German adninistrative records and including a complete employment and earnings history for each worker in our sample. We find evidence of increased labour market attachments for individuals with higher returns to experience. This has important implications for the estimates. The estimated returns to experimence are 2.7% a year. The returns to tenure are close to zero. Crucial identifying information is provided by plant closures.
Authors

Christian Dustmann

Research Fellow Yale University
Costas is a Research Fellow of the IFS and a Professor of Economics at Yale University and a Visiting Professor at University College London.
Working Paper details
- DOI
- 10.1920/wp.ifs.1999.9901
- Publisher
- IFS
Suggested citation
Dustmann, C and Meghir, C. (1999). Wages, experience and seniority. London: IFS. Available at: https://ifs.org.uk/publications/wages-experience-and-seniority-0 (accessed: 9 February 2025).
More from IFS
Understand this issue

Do tariffs work?
We discuss the economic consequences of tariffs, why governments use them, and whether they actually achieve their intended goals.
23 January 2025

How can we make government more productive?
How can the public sector do more with less? We explore productivity trends, government reform and lessons from private sector innovation.
3 December 2024

Minimum wages in the UK – how high can they go?
In the UK today, earnings inequality is substantially higher than it used to be.
30 October 2024
Policy analysis

Spending per pupil or student per year at different stages of education (2024–25 prices)
This chart compares the trends in public spending per student on various stages of education over time in England.
16 January 2025

Repayments by lifetime earnings decile under the system applying for the 2022 university entry cohort
The lowest-earning 10% of graduates repay around 1.1% of their lifetime earnings, while the highest-earning 10% of graduates repay around 1.2%.
10 January 2025

Comparing the systems applying for the 2022 and 2024 university entry cohorts
Under the new system, student loans will become cheaper for high-earning graduates and more expensive for those with lower earnings.
10 January 2025
Academic research

Household responses to trade shocks
We study the impact of Chinese import competition in the 2000s on workers and their households in England and Wales.
12 November 2024

Health shocks, health insurance, human capital, and the dynamics of earnings and health
We specify and calibrate a life-cycle model of labor supply and savings incorporating health shocks and medical treatment decisions.
21 October 2024

Treatment effects with targeting instruments
Multivalued treatment is commonplace in applications. We explore the use of discrete-valued instruments to control for selection bias in this setting.
12 December 2024