Advanced Search
MyIDEAS: Login

Interpreting European and US Labour Market Differences: The Specificity of Human Capital Investments

Contents:

Author Info

  • Wasmer, Etienne

Abstract

This Paper suggests that in the US context, workers tend to invest in general human capital especially since they face little employment protection and low unemployment benefits, while the European model (generous benefits and higher duration of jobs) favours specific human capital investments. This conjecture provides, among other things, a rationale for differences in labour mobility and reallocation costs, which are typically ignored in American ‘International Trade’ textbooks yet figure extremely large in the public debate in Europe. The main argument is based on a fundamental property of human capital investments: they are not independent of the aggregate state of labour markets, and, in particular, frictions and slackness of the labour market raise the returns to specific human capital investments relative to general capital investments. This is a property that Becker’s seminal contributions could not envisage in the context of perfect labour markets. Two sets of implications are then derived: on one hand, mobility costs are high in Europe and transitions between steady-states has especially strong adverse effects. Jobs endogenously last longer in Europe than in the US, but when they are destroyed, the welfare loss for workers is higher. On the other hand, in the steady-state, European workers, ceteris paribus, are more efficient. In terms of transaction costs, the US pay on average higher search/hiring costs in the labour market, and smaller training costs, so that the welfare implications of each type of economy are a priori ambiguous: no model dominates the other one, and each one has its own coherence, although the European one is more fragile when macroeconomic conditions change.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.cepr.org/pubs/dps/DP3780.asp
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3780.

as in new window
Length:
Date of creation: Jan 2003
Date of revision:
Handle: RePEc:cpr:ceprdp:3780

Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information:
Email:

Related research

Keywords: general human capital; matching; specific human capital; training; unemployment;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Katharine G. Abraham & Henry S. Farber, 1987. "Job Duration, Seniority, and Earnings," NBER Working Papers 1819, National Bureau of Economic Research, Inc.
  2. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-76, February.
  3. Ljungqvist, Lars & Sargent, Thomas J, 2002. "The European Employment Experience," CEPR Discussion Papers 3543, C.E.P.R. Discussion Papers.
  4. John Hassler & José Vicente Rodríguez Mora, 2003. "A Positive Theory of Geographic Mobility and Social Insurance," Working Papers 97, Barcelona Graduate School of Economics.
  5. Decressin, Jörg & Fatás, Antonio, 1994. "Regional Labour Market Dynamics in Europe," CEPR Discussion Papers 1085, C.E.P.R. Discussion Papers.
  6. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
  7. Bertola, Giuseppe & Ichino, Andrea, 1995. "Wage Inequality and Unemployment: US vs Europe," CEPR Discussion Papers 1186, C.E.P.R. Discussion Papers.
  8. Acemoglu, Daron & Pischke, Jorn-Steffen, 1999. "Beyond Becker: Training in Imperfect Labour Markets," Economic Journal, Royal Economic Society, vol. 109(453), pages F112-42, February.
  9. Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," Working Paper Series in Economics and Finance 178, Stockholm School of Economics.
  10. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 539-572, June.
  11. Malcomson, J., 1998. "Individual employment contracts," Discussion Paper Series In Economics And Econometrics 9804, Economics Division, School of Social Sciences, University of Southampton.
  12. Saint-Paul, Gilles, 2000. "The Political Economy of Labour Market Institutions," OUP Catalogue, Oxford University Press, number 9780198293323.
  13. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  14. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  15. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "Job reallocation, employment fluctuations and unemployment," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 18, pages 1171-1228 Elsevier.
  16. Hashimoto, Masanori & Raisian, John, 1985. "Employment Tenure and Earnings Profiles in Japan and the United States," American Economic Review, American Economic Association, vol. 75(4), pages 721-35, September.
  17. Joseph G. Altonji & Robert A. Shakotko, 1985. "Do Wages Rise With Job Seniority?," NBER Working Papers 1616, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Juan F. Jimeno & Esther Moral & Lorena Saiz, 2006. "Structural breaks in labor productivity growth: the United States vs. the European Union," Banco de Espa�a Working Papers 0625, Banco de Espa�a.
  2. Berthold, Norbert & Neumann, Michael & Zenzen, Jupp, 2007. "Die Zukunft der Arbeit: Verdopplung, Entkopplung, regionale Divergenz?," Wirtschaftswissenschaftliche Beiträge 96, Julius-Maximilians-Universität Würzburg, Lehrstuhl für Volkswirtschaftslehre, insbes. Wirtschaftsordnung und Sozialpolitik.
  3. Ansgar Belke & Holger Zemanek & Gunther Schnabl, 2010. "Current Account Balances and Structural Adjustment in the Euro Area," Ruhr Economic Papers 0176, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  4. Schwerdt, Guido & Turunen, Jarkko, 2006. "Growth in Euro Area Labour Quality," CEPR Discussion Papers 5509, C.E.P.R. Discussion Papers.
  5. Alfred Garloff & Anja Kuckulenz, 2006. "Training, Mobility, and Wages: Specific Versus General Human Capital," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 226(1), pages 55-81, January.
  6. Holger Zemanek & Ansgar Belke & Gunther Schnabl, 2009. "Current Account Imbalances and Structural Adjustment in the Euro Area: How to Rebalance Competitiveness," CESifo Working Paper Series 2639, CESifo Group Munich.
  7. Guido Schwerdt & Jarkko Turunen, 2007. "Changes in Human Capital: Implications for Productivity Growth in the Euro Area," Ifo Working Paper Series Ifo Working Paper No. 53, Ifo Institute for Economic Research at the University of Munich.
  8. Grip Andries de, 2006. "Evaluating Human Capital Obsolescence," ROA Working Paper 001, Maastricht University, Research Centre for Education and the Labour Market (ROA).
  9. Gervais, Martin & Livshits, Igor & Meh, Césaire, 2008. "Uncertainty and the specificity of human capital," Journal of Economic Theory, Elsevier, vol. 143(1), pages 469-498, November.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:3780. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.