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Specific Capital and Technological Variety

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  • Boyan Jovanovic
  • Peter L. Rousseau

Abstract

Growth of technological variety offers more scope for the division of labor. And when a division of labor requires some specific training, the technological specificity of human capital grows and, with it, probably the firm specificity of that capital. We build a simple model that captures this observation. The model implies that a rising specialization of human and physical capital raises the rents in the average match between a firm and its human and physical capital. We document that in the last 40 years the firm's share of those rents has also grown, and we use the model to explain why this shift may have taken place.

Suggested Citation

  • Boyan Jovanovic & Peter L. Rousseau, 2008. "Specific Capital and Technological Variety," NBER Working Papers 13998, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:13998
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    Cited by:

    1. Andrea L. Eisfeldt & Dimitris Papanikolaou, 2013. "Organization Capital and the Cross-Section of Expected Returns," Journal of Finance, American Finance Association, vol. 68(4), pages 1365-1406, August.
    2. Markus Poschke, 2018. "The Firm Size Distribution across Countries and Skill-Biased Change in Entrepreneurial Technology," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(3), pages 1-41, July.
    3. Lustig, Hanno & Syverson, Chad & Van Nieuwerburgh, Stijn, 2011. "Technological change and the growing inequality in managerial compensation," Journal of Financial Economics, Elsevier, vol. 99(3), pages 601-627, March.
    4. Xiaolan Zhang, 2014. "Who Bears Firm-Level Risk? Implications for Cash Flow Volatility," 2014 Meeting Papers 184, Society for Economic Dynamics.
    5. Gillman, Max, 2021. "Steps in industrial development through human capital deepening," Economic Modelling, Elsevier, vol. 99(C).

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    More about this item

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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