PRELIMINARY AND INCOMPLETE, PLEASE DO NOT QUOTE

This paper estimates the returns to experience and job tenure using a simultaneous equation model that accounts for the potential endogeneity of seniority in the wage determination process. It uses panel data for Italian workers ’ histories based on social security records, for the years 1985-1999. This dataset has not been used for this research purpose to this date. The hypothesis of exogeneity of seniority can be tested and is rejected due to endogeneity of the match effect. The first two years on the job are associated with a two percent yearly wage increase. Effects of seniority are very small afterwards. The paper also discusses some implications of these results. 1