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Schooling, employer learning, and internal labor market effect: Wage dynamics and human capital investment in the Japanese steel industry, 1930-1960s

Nakabayashi, Masaki (2011): Schooling, employer learning, and internal labor market effect: Wage dynamics and human capital investment in the Japanese steel industry, 1930-1960s.

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Abstract

Schooling, an observable signal, decreases its impact on wages as employers “publicly” learn workers’ true types from workers’ experience in the market. This symmetric employer learning hypothesis has been empirically questioned as, first, current and potential employers in fact asymmetrically learn, and second, complementarity between schooling and work experience could enshroud learning effect. Microanalysis of Japanese steel industry shows, 1) experience before entering the long-term employment is complementary to schooling, 2) employer learning effect dominates the complementarity effect after workers’ joining the long-term employment. It suggests that previous evidences of employer learning have in fact captured internal labor market effect.

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