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

Listed author(s):
  • Parent, D.

Using data from the NLSY (1979-1991) and from the PSID (1981-1987), l 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 1 include total experience in the industry as an additional explanatory variable, the return to seniority is markedly reduced when 1 use GLS while it virtually disappears when I use IV-GLS, although this conclusion varies somewhat according to the occupation category. Note also that this result holds whether the analysis is carried out at the 1-digit or 3-digit levels. 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. In other words, for these two samples of workers, the wage formation process appears to be quite competitive.

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Paper provided by Centre interuniversitaire de recherche en économie quantitative, CIREQ in its series Cahiers de recherche with number 9508.

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Length: 19 pages
Date of creation: 1995
Handle: RePEc:mtl:montec:9508
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  1. Abraham, Katharine G & Farber, Henry S, 1987. "Job Duration, Seniority, and Earnings," American Economic Review, American Economic Association, vol. 77(3), pages 278-297, June.
  2. Robert H. Topel, 1990. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," NBER Working Papers 3294, National Bureau of Economic Research, Inc.
  3. David Margolis, 1995. "High Wage Workers and High Wage Firms," Post-Print halshs-00378229, HAL.
  4. MacLeod, W.B. & Malcomson, J.M., 1992. "Specific investment and wage profiles in labour markets," Discussion Paper Series In Economics And Econometrics 9228, Economics Division, School of Social Sciences, University of Southampton.
  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. Jovanovic, Boyan, 1979. "Firm-specific Capital and Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1246-1260, December.
  7. 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 811-837, September.
  8. Joseph G. Altonji & Robert A. Shakotko, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Oxford University Press, vol. 54(3), pages 437-459.
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