Early Starters Versus Late Beginners

We consider a model of wage formation characterized by two features: learning and downward rigidity. We show that wages should exhibit a \late beginner" property: controlling for the wage at date t, the wage at date (t+1) should be negatively correlated with the wage at date (t-1). We test this property on a sample of about 1000 executives of a French state-owned rm whose careers we observe for 15 years. This organization exhibits the features that characterize internal labor markets; in particular, careers consist in sequences of discrete promotions, a fact that generates speci c econometric problems. The results con rm the prediction. Paper presented at seminars in Boston, Bruxelles, Chicago, London, Marseille, Paris, Tokyo and Toulouse. We thank the participants and G. Baker, G. Becker, B. Holmstrom, G. Laroque, B. McLeod, C. Meghir, M. Meyer, C. Prendergast, T. Philipson and especially an anonymous referee for useful comments and suggestions. Errors are ours. Department of Economics, University of Chicago. CREST and CNRS, Paris. MAD, Universit e de Paris 1.