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Industry-Specific Capital and the Wage Profile: Evidence from the NLSY and the PSID

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  • Daniel Parent

Abstract

Using data from the NLSY (1979-1991) and from the Panel Study of Income Dynamics (PSID, 1981-1987), we seek to determine whether there is any net positive return to tenure with the current employer once we control for industry-specific capital. Using data from the PSID, Topel (JPE 1991) concluded that 10 years of seniority with an employer translated into a net return of about 25%. However, once we include total experience in the industry as an additional explanatory variable, the return to seniority vanishes almost completely when we use either OLS, GLS or IV-GLS estimation methods, although this conclusion varies somewhat according to the occupation, some occupation classes showing a negative net return to tenure and others showing a positive net return. Note also that this result holds whether the analysis is carried out at the 1-digit, 2-digit or 3-digit level. Therefore, it seems that what matters most for the wage profile in terms of human capital is not so much firm-specificity but industry-specificity. Avec les données du NLSY ainsi que celles du Panel Study of Income Dynamics (PSID), on cherche à déterminer s'il y a un rendement positif net lié à l'ancienneté dans la firme. Topel (JPE 1991) a montré avec un échantillon du PSID l'existence d'un rendement substantiel (25 % en 10 ans). Toutefois, du moment que l'on inclut l'expérience dans l'industrie courante dans l'équation de salaire (en plus de l'ancienneté dans la firme ainsi que l'expérience totale de travail), l'effet d'ancienneté disparaît presque complètement, que l'on estime par simples moindres carrés généralisés ou par la méthode des variables instrumentales (IV-GLS), et ce, avec les deux échantillons différents. ¸ noter également que ce résultat est robuste au degré d'agrégation des classes d'industries.

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Bibliographic Info

Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 729.

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Date of creation: Nov 1995
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Handle: RePEc:pri:indrel:729

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Keywords: tenure effect; industry-specific capital;

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  1. MacLeod, W. Bentley & Malcomson, James M., 1993. "Specific investment and wage profiles in labour markets," European Economic Review, Elsevier, vol. 37(2-3), pages 343-354, April.
  2. Denyse L. Dagenais & Marcel Dagenais, 1995. "Higher Moment Estimators for Linear Regression Models With Errors in the Variables," CIRANO Working Papers 95s-13, CIRANO.
  3. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-77, October.
  4. John M. Abowd & Francis Kramarz & David N. Margolis, 1994. "High Wage Workers and High Wage Firms," NBER Working Papers 4917, National Bureau of Economic Research, Inc.
  5. Finnie, R., 1993. "Tenure Experience, and Men's and Women's Wages: Panel Estimates from the National Longitudinal Survey of Youth," Papers 9305, Laval - Recherche en Politique Economique.
  6. Robert H. Topel, 1990. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," NBER Working Papers 3294, National Bureau of Economic Research, Inc.
  7. Griliches, Zvi, 1986. "Economic data issues," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 25, pages 1465-1514 Elsevier.
  8. Abraham, Katharine G & Farber, Henry S, 1987. "Job Duration, Seniority, and Earnings," American Economic Review, American Economic Association, vol. 77(3), pages 278-97, June.
  9. Kletzer, Lori Gladstein, 1989. "Returns to Seniority after Permanent Job Loss," American Economic Review, American Economic Association, vol. 79(3), pages 536-43, June.
  10. MacLeod, W Bentley & Malcomson, James M, 1993. "Investments, Holdup, and the Form of Market Contracts," American Economic Review, American Economic Association, vol. 83(4), pages 811-37, September.
  11. Jovanovic, Boyan, 1979. "Firm-specific Capital and Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1246-60, December.
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