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Uncertainty in Labor Productivity and Specific Human Capital Investment

Author

Listed:
  • Chong-En Bai

    (University of Hong Kong)

  • Yijiang Wang

    (University of Minnesota)

Abstract

Uncertainty in labor productivity (ULP) is affected by many factors, such as worker-employer matching, technology, and macroeconomic conditions. Not surprisingly, ULP varies across firms, industries, and economies. How do variations in ULP affect specific human capital (SHC) investment, wage, and labor turnover? A fixed-wage model is used to show that the answer depends critically on the initial level of ULP. The model is also used to show that wage and SHC are always positively correlated, but SHC investment and labor turnover do not have a monotonic relationship. These results have implications for empirical studies and public policies affecting ULP.

Suggested Citation

  • Chong-En Bai & Yijiang Wang, 2003. "Uncertainty in Labor Productivity and Specific Human Capital Investment," Journal of Labor Economics, University of Chicago Press, vol. 21(3), pages 651-676, July.
    • Handle: RePEc:ucp:jlabec:v:21:y:2003:i:3:p:651-676
    DOI: 10.1086/374962
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    References listed on IDEAS

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    Cited by:

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    2. Bilkic, N. & Gries, T. & Pilichowski, M., 2012. "Stay in school or start working? — The human capital investment decision under uncertainty and irreversibility," Labour Economics, Elsevier, vol. 19(5), pages 706-717.
    3. MORITA, Hodaka & TANG, Cheng-Tao, 2017. "Asset Specificity, Human Capital Acquisition, and Labor Market Competition," Discussion paper series HIAS-E-42, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    4. Steffen Merkel & Sascha L. Schmidt & Benno Torgler, 2017. "The effect of individual uncertainty on the specificity of human capital: empirical evidence from career developments in professional soccer," Applied Economics, Taylor & Francis Journals, vol. 49(21), pages 2083-2095, May.
    5. Dan Bernhardt & Steeve Mongrain, 2010. "The Layoff Rat Race," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(1), pages 185-210, March.
    6. Yijiang Wang, "undated". "Product Market Conditions and Job Design," Working Papers 0402, Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus).
    7. Yijiang Wang, "undated". "Demand, Supply and Coordination: An Integrated Theory of the Division of Labor," Working Papers 0405, Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus).
    8. Chong-En Bai & Chenggang Xu, 2001. "Ownership, Incentives and Monitoring," STICERD - Theoretical Economics Paper Series 413, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    9. Mark Yanochik & John King, 2015. "The Classical Bargaining Model for Organized Labor," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 43(3), pages 375-382, September.
    10. John T. King & Mark A. Yanochik, 2011. "John Stuart Mill and The Economic Rationale for Organized Labor," The American Economist, Sage Publications, vol. 56(2), pages 28-34, November.

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