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Do Initial Conditions Persist between Firms?

Do Initial Conditions Persist between Firms?

An Analysis of Firm-Entry Cohort Effects and Job Losers Using Matched Employer-Employee Data

(p.135) 4 Do Initial Conditions Persist between Firms?
The Analysis of Firms and Employees
Till von WachterStefan Bender
University of Chicago Press

An increasing number of studies suggest that the starting conditions in the first year of a worker's job or labor market entry can have long-term effects on earnings and career development. Using data on the complete career histories of all workers in a large manufacturing sector in Germany, this chapter examines the prevalence and heterogeneity of firm-entry cohort effects for a large sample of firms over more than twenty years. To ensure that the cohort differences in wages are not due to selective entry of workers into firms, the chapter controls for observable firm and worker characteristics as well as worker fixed effects. In addition, it analyzes whether entry conditions fade within firms and whether firms' wages tend to converge to a common market wage over time. The chapter also looks at the effects of job displacement on wage changes for workers with high, medium, or low starting wages at the lost job. Finally, it discusses the impact of past wage premiums on the level of wages after job loss.

Keywords:   labor market entry, earnings, career development, Germany, workers, firms, wages, job loss, job displacement

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