Gu, Ran (2019): Specific Capital, Firm Insurance, and the Dynamics of the Postgraduate Wage Premium.
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Abstract
Postgraduate degree holders experience lower cyclical wage variation than those with undergraduate degrees. Moreover, postgraduates have more specific human capital than undergraduates. Using an equilibrium search model with long-term contracts and imperfect monitoring of worker effort, this paper attributes the cyclicality of the postgraduate-undergraduate wage gap to the differences in specific capital. Imperfect monitoring creates a moral hazard problem that requires firms to pay efficiency wages. More specific capital leads to lower mobility, thereby alleviating the moral hazard and improving risk-sharing. Estimates reveal that specific capital explains the differences both in labour turnover and in wage cyclicality across education groups.
Item Type: | MPRA Paper |
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Original Title: | Specific Capital, Firm Insurance, and the Dynamics of the Postgraduate Wage Premium |
Language: | English |
Keywords: | specific human capital, postgraduate, wage premium, wage cyclicality, long-term contracts |
Subjects: | E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles I - Health, Education, and Welfare > I2 - Education and Research Institutions > I24 - Education and Inequality J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J64 - Unemployment: Models, Duration, Incidence, and Job Search |
Item ID: | 96254 |
Depositing User: | Dr Ran Gu |
Date Deposited: | 02 Oct 2019 12:06 |
Last Modified: | 02 Oct 2019 12:06 |
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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/96254 |