Daniel Parent

First name
Daniel
Last name
Parent
Author
Abstract

Using method of moments techniques (ref: Chamberlain (1984), Gallant and Jorgenson (1979)),
this paper’s objective is to test the predictions of the theory of job-matching and the theory of
human capital pertaining to the covariance structure of residuals from a typical Mincer log
earnings equation. The selection process implicit to job matching is such that we should observe
a decrease in the contribution of the variance of the job-match component when we follow the
workers as they acquire tenure in their job. Results are generally in agreement with these
predicted patterns, especially in the case of more educated workers. On the other hand, if jobs
are considered as pure experience goods, the predicted increase in the variance at the start of the
employment relationship is not supported by the data, except perhaps for less educated workers.
Turning next to human capital theory, the predicted tradeoff between the job-specific intercept
and slope parameters is strongly supported by the data, especially in the case of workers having
at least a High School diploma.

Year of Publication
1995
Number
351
Date Published
11/1995
Publication Language
eng
Citation Key
8286
Parent, D. (1995). Matching, Human Capital, and the Covariance Structure of Earnings. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01gq67jr18n (Original work published November 1995)
Working Papers
Author
Abstract

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 l 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 l 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.

Year of Publication
1995
Number
350
Date Published
11/1995
Publication Language
eng
Citation Key
Journal of Labor Economics, Vol. 18, No. 2, April 2000
Parent, D. (1995). Industry-Specific Capital and the Wage Profile: Evidence from the NLSY and the PSID. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01p5547r37j (Original work published November 1995)
Working Papers