Advanced Search
MyIDEAS: Login

Human capital formation under product market uncertainty

Contents:

Author Info

  • Amend, Elke

    ()

  • Herbst, Patrick

    ()

Registered author(s):

    Abstract

    The paper presents a microeconomic model of human capital formation in a local labour market, with heterogeneous workers and firms, when product markets are characterised by price uncertainty. We analyse a setting where firms are hit by demand shocks determining either a good or a bad state. Firms produce for a competitive output market with differing technologies, thus requiring diverse skills. In anticipation of firm behaviour, workers choose between specialising into a certain type of skills, and accumulating general skills. We thus look at the endogenous determination of the level of both horizontally differentiated and general human capital. Our findings suggest that, with equal probability on each shock scenario, a higher output price (booming industry) will raise the return to both general and specific human capital. Labour market size (skill diversification) however, has a differential impact. As the market is enlarged, workers are likely to form more general human capital at the expense of directly productive human capital. We then investigate a specific shock probability structure and find that under more symmetric shocks the incentive to invest in either kind of human capital is weaker. Interpreting the symmetry of shocks as an indicator of the degree of regional industrial specialisation, we infer that, everything else being constant, specialised regions will be less flexible in their response to structural change and also less productive. Bearing in mind the importance of human capital for economic growth, adverse effects on the growth rate of specialised regions may follow.

    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-sre.wu-wien.ac.at/ersa/ersaconfs/ersa02/cd-rom/papers/092.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa02p092.

    as in new window
    Length:
    Date of creation: Aug 2002
    Date of revision:
    Handle: RePEc:wiw:wiwrsa:ersa02p092

    Contact details of provider:
    Postal: Welthandelsplatz 1, 1020 Vienna, Austria
    Web page: http://www.ersa.org

    Related research

    Keywords:

    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. HAMILTON, Jonathan & THISSE, Jacques-François & ZENOU, Yves, . "Wage competition with heterogeneous workers and firms," CORE Discussion Papers RP -1463, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Kim, Sunwoong, 1991. "Heterogeneity of labor markets and city size in an open spatial economy," Regional Science and Urban Economics, Elsevier, vol. 21(1), pages 109-126, May.
    3. Helsley, Robert W. & Strange, William C., 1990. "Matching and agglomeration economies in a system of cities," Regional Science and Urban Economics, Elsevier, vol. 20(2), pages 189-212, September.
    4. Kim, Sunwoong, 1989. "Labor Specialization and the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 692-705, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    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:wiw:wiwrsa:ersa02p092. 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: (Gunther Maier).

    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.