Do Wages Rise with Job Seniority? The Swiss Case

Whether or not seniority has a substantial effect on wages has been the subject of much controversy. ALTONJI and SHAKOTKO (1987) and TOPEL (1991) have put forward different empirical strategies to deal with unobserved heterogeneity. Their methods yield different results for the U.S. labor market. Different methods in controlling economy wide time trends are being identified as one of the main reasons for this finding. In this paper, we apply these methods on Swiss data. We find that returns to tenure are lower than in the U.S., and that differences between the two methodological approaches are minor with our data sample. The wage stagnation during the observation period rules out the possibility of different detrending methods as being the main reason for differences in the estimators.