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Matching, Human Capital, and the Covariance Structure of Earnings

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  • Daniel Parent

Abstract

Using method of moments techniques (ref: Chamberlain (1984), Gallant and Jorgenson (1979)), this paper's objective is to test the predictions of the theory of job-matching and the theory of human capital pertaining to the covariance structure of residuals from a typical Mincer log earnings equation. The selection process implicit to job matching is such that we should observe a decrease in the contribution of the variance of the job-match component when we follow the workers as they acquire tenure in their job. Results are generally in agreement with these predicted patterns, especially in the case of more educated workers. On the other hand, if jobs are considered as pure experience goods, the predicted increase in the variance at the start of the employment relationship is not supported by the data, except perhaps for less educated workers. Turning next to human capital theory, the predicted trade-off between the job-specific intercept and slope parameters is strongly supported by the data, especially in the case of workers having at least a High School diploma. Par le biais de la méthode des moments (réf.: Chamberlain (1984), Gallant et Jorgenson (1979)) et avec des données non balancées du NLSY, cette étude cherche à tester les prédictions engendrées par la théorie du matching ainsi que la théorie du capital humain quant à la structure de covariance des résidus d'une équation de salaire typique à la Mincer. Le processus de sélection qu'implique le matching fait en sorte que l'on devrait observer une diminution de la contribution du terme reflétant la variance dans la qualité du match lorsque l'on suit les travailleurs à mesure qu'ils acquièrent de l'ancienneté dans leur emploi. Les résultats corroborent cette prédiction surtout pour les travailleurs plus scolarisés. Par contre, dans la version pure experience good de la théorie, la prédiction à l'effet que la variance devrait s'accroître au tout début de la relation d'emploi s'avère non validée par les résultats
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  • Daniel Parent, 1995. "Matching, Human Capital, and the Covariance Structure of Earnings," CIRANO Working Papers 95s-25, CIRANO.
    • Handle: RePEc:cir:cirwor:95s-25
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    File URL: https://cirano.qc.ca/files/publications/95s-25.pdf
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    Cited by:

    1. Pesaran, M.H. & Ruge-Murcia, F.J., 1995. "A Discrete-Time Version of Target Zone Models with Jumps," Cahiers de recherche 9530, Universite de Montreal, Departement de sciences economiques.
    2. Lorenzo Cappellari & Marco Leonardi, 2016. "Earnings Instability and Tenure," Scandinavian Journal of Economics, Wiley Blackwell, vol. 118(2), pages 202-234, April.
    3. Gielen, A. C. & van Ours, J.C., 2006. "Why do Worker-Firm Matches Dissolve?," Other publications TiSEM 8c99a292-9f34-4ce8-8fd9-9, Tilburg University, School of Economics and Management.
    4. Paul Makdissi & Cyril Téjédo, 2000. "Problèmes d’appariement et politique de l’emploi," Cahiers de recherche 00-04, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    5. Stephanie Lluis, 2005. "The Role of Comparative Advantage and Learning in Wage Dynamics and Intrafirm Mobility: Evidence from Germany," Journal of Labor Economics, University of Chicago Press, vol. 23(4), pages 725-768, October.
    6. Adams, Scott J. & Heywood, John S. & Ullman, Darin F. & Venkatesh, Shrathinth, 2022. "Social jobs and the returns to drinking," Economics & Human Biology, Elsevier, vol. 46(C).
    7. Munasinghe, Lalith, 2000. "Wage Growth and the Theory of Turnover," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 204-220, April.
    8. Amigues, Jean-Pierre & Favard, Pascal & Gaudet, Gerard & Moreaux, Michel, 1998. "On the Optimal Order of Natural Resource Use When the Capacity of the Inexhaustible Substitute Is Limited," Journal of Economic Theory, Elsevier, vol. 80(1), pages 153-170, May.
    9. Devereux, Paul J., 2002. "The Importance of Obtaining a High-Paying Job," MPRA Paper 49326, University Library of Munich, Germany.
    10. Soohyung Lee, 2008. "Preferences and Choice Constraints in Marital Sorting: Evidence From Korea," Discussion Papers 07-042, Stanford Institute for Economic Policy Research.
    11. Pene Kalulumia & Denis Bolduc, 2004. "Generalized Mixed Estimation Of A Multinomial Discretecontinuous Choice Model For Electricity Demand," Cahiers de recherche 04-01, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    12. Yves Sprumont, 1998. "On the Game-Theoretic Structure of Public-Good Economies," International Journal of Game Theory, Springer;Game Theory Society, vol. 26(4), pages 455-472.
    13. Polachek, Solomon W., 2008. "Earnings Over the Life Cycle: The Mincer Earnings Function and Its Applications," Foundations and Trends(R) in Microeconomics, now publishers, vol. 4(3), pages 165-272, April.
    14. John Baldwin & Petr Hanel & David Sabourin, 2000. "Les déterminants des activités d’innovation dans les entreprises de fabrication canadiennes : le rôle des droits de propriété intellectuelle," Cahiers de recherche Statistique Canada No 11F, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    15. Stéphanie Lluis, 2001. "Wage Policy of Firms: An Empirical Investigation," CIRANO Working Papers 2001s-47, CIRANO.
    16. Pene Kalulumia, 2002. "Effects of government debt on interest rates: evidence from causality tests in johansen-type models," Cahiers de recherche 02-07, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    17. Petr Hanel, 2003. "Impact Of Government Support Programs On Innovation By Canadian Manufacturing Firms," Cahiers de recherche 04-02, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    18. Marco Leonardi, 2017. "Job Mobility And Earnings Instability," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 260-280, January.

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    More about this item

    Keywords

    Method of moments; Job-matching theory; Human capital theory; Méthode des moments ; Théorie du matching ; Théorie du capital humain;
    All these keywords.

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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