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Why Do Wage Profiles Slope Upward? Tests of the General Human Capital Model

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  • Neumark, David
  • Taubman, Paul

Abstract

This article tests the implications of the general human capital that (1) at the individual level, there is a negative relationship between the initial wage level and wage growth of inexperienced workers and (2) at the market level, the ratio of the present values of wage profiles of investors and otherwise identical noninvestors equals one. The authors find a negative relationship between initial wage levels and wage growth, even after correcting for negative biases in existing estimates of this relationship. They also find that the ratio of the present values of rising wage profiles to flat wage profiles is generally close to one. Copyright 1995 by University of Chicago Press.

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  • Neumark, David & Taubman, Paul, 1995. "Why Do Wage Profiles Slope Upward? Tests of the General Human Capital Model," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 736-761, October.
    • Handle: RePEc:ucp:jlabec:v:13:y:1995:i:4:p:736-61
    DOI: 10.1086/298391
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    14. repec:eee:labchp:v:1:y:1986:i:c:p:525-602 is not listed on IDEAS
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    Cited by:

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    2. Li, Gan & Jaeun, Shin & Qi, Li, 2010. "Initial Wage, Human Capital and Post Wage Differentials," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 51(2), pages 23-42, December.
    3. George J. Borjas, 2000. "The Economic Progress of Immigrants," NBER Chapters, in: Issues in the Economics of Immigration, pages 15-50, National Bureau of Economic Research, Inc.
    4. Mengistae, Taye, 1999. "The relative effects of skill formation and job matching on wage growth in Ethiopia," Policy Research Working Paper Series 2104, The World Bank.
    5. David Neumark, 2003. "Age Discrimination Legislation in the United States," Contemporary Economic Policy, Western Economic Association International, vol. 21(3), pages 297-317, July.
    6. Zwick, Thomas, 2011. "Seniority wages and establishment characteristics," Labour Economics, Elsevier, vol. 18(6), pages 853-861.
    7. Florenz Plassmann & Neha Khanna, 2007. "Assessing the Precision of Turning Point Estimates in Polynomial Regression Functions," Econometric Reviews, Taylor & Francis Journals, vol. 26(5), pages 503-528.
    8. Neumark, David & Song, Joanne, 2013. "Do stronger age discrimination laws make Social Security reforms more effective?," Journal of Public Economics, Elsevier, vol. 108(C), pages 1-16.
    9. Zwick, Thomas, 2009. "Why Pay Seniority Wages?," ZEW Discussion Papers 09-005, ZEW - Leibniz Centre for European Economic Research.
    10. Reamonn Lydon & Ian Walker, 2005. "Welfare to work, wages and wage growth," Fiscal Studies, Institute for Fiscal Studies, vol. 26(3), pages 335-370, September.
    11. Einarsson, Tor & Marquis, Milton H., 1999. "Formal Training, On-the-Job Training and the Allocation of Time," Journal of Macroeconomics, Elsevier, vol. 21(3), pages 423-442, July.
    12. Rosemary Walker & Liviu Florea, 2014. "Easy-Come-Easy-Go: Moral Hazard in the Context of Return to Education," Journal of Business Ethics, Springer, vol. 120(2), pages 201-217, March.

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