July 2001

IZA DP No. 336: Careers and Wage Growth within Large Firms

Francisco Lima, Pedro T. Pereira

published in: International Journal of Manpower, 2003, 7 (24), 812-835

The relationship between the worker’s career path and wage growth is studied using a longitudinal sample of large firms. The econometric analysis shows that promoted workers receive a positive wage premium even if they stay in the same job level. Demotions are associated with negative wage premiums. The wage-career dynamics generates a U-shape to the wage premiums for promotions over the hierarchical ladder. In the context of the model discussed, this shape suggests a stronger learning and/or human capital accumulation effect at the bottom of the hierarchy and a stronger job assignment effect at the top.