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


  • Daniel Parent

    (Universite de Sherbrooke and Princeton University)


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.

Suggested Citation

  • Daniel Parent, 1995. "Industry-Specific Capital and the Wage Profile: Evidence from the NLSY and the PSID," Working Papers 729, Princeton University, Department of Economics, Industrial Relations Section..
  • Handle: RePEc:pri:indrel:350

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    References listed on IDEAS

    1. MacLeod, W. Bentley & Malcomson, James M., 1993. "Specific investment and wage profiles in labour markets," European Economic Review, Elsevier, vol. 37(2-3), pages 343-354, April.
    2. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
    3. 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.
    4. 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.
    5. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-176, February.
    6. 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.
    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. Jovanovic, Boyan, 1979. "Firm-specific Capital and Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1246-1260, December.
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    More about this item


    tenure effect; industry-specific capital;

    JEL classification:

    • B29 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Other
    • B3 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals


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