Full Citation

Title: Specific Human Capital and Real Wage Cyclicality: An Application to Postgraduate Wage Premium

Citation Type: Working Paper

Publication Year: 2019

ISBN:

ISSN:

DOI:

NSFID:

PMCID:

PMID:

Abstract: This paper examines how specific human capital affects labour turnover and real wage cyclicality in a frictional labour market. I develop an equilibrium search model with long-term contracts and imperfect monitoring of worker ef- fort. Imperfect monitoring creates a moral hazard problem that requires firms to pay efficiency wages. The optimal contract implies that more specific cap- ital reduces job separation, thereby alleviating the moral hazard and increas- ing wage stability over the business cycle. I apply this model to explain novel stylised facts about the cyclicality of the postgraduate-undergraduate wage pre- mium. Postgraduate degree holders experience lower cyclical variation in real wages than those with undergraduate degrees. This effect is significant for workers with a long tenure, but not for new hires. Moreover, postgraduates have more specific human capital than undergraduates. Estimates reveal that specific capital can explain the educational gaps both in labour turnover and in real wage cyclicality.

Url: https://mpra.ub.uni-muenchen.de/98027/1/MPRA_paper_98027.pdf

User Submitted?: No

Authors: Gu, Ran

Series Title: MPRA

Publication Number: 98027

Institution: Munich Personal RePEc Archive

Pages:

Publisher Location:

Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure, Other

Countries: