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Employee Heterogeneity and Within-Firm Experience-Earnings Profiles: A Nonparametric Analysis

By Ross Campbell


Abstract\ud Motivated by a priori uncertainty with respect to the parametric specification of\ud the earnings function, I model the earnings function as semiparametric partially\ud linear model and follow the estimation approach described in Robinson (1988).\ud Using data from the personnel records of a large major UK based financial\ud sector employer, I let years of within-firm and pre-firm experience form the\ud nonparametrically modelled component of the earnings function. It is shown that\ud the estimated within-firm experience earnings profiles, which are conditional\ud upon a given number years of pre-firm experience accumulated before entry,\ud converge and even overtake as years of pre-firm experience increases. This result\ud can be explained with the recognition of unobservable explanatory variables,\ud such as the match and individual quality of the employees, both of which are a\ud function of years of within- and pre-firm experience and wages

Year: 2006
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