The Effect of Utilization Rate on Specialization

Abstract

The recognition that investment in human capital depends on its utilization (i.e., the number of hours it is used) is offered as an explanation of diverse phenomena such as of tourists' behavior, women's participation rate in the labor force, and the decline of investment in human capital with age. In this paper we examine the way the utilization rate of human capital affects specialization. We demonstrate that even if training in each specialty is subject to diminishing returns or rising cost, the utilization effects of human capital would prompt two identical individuals to specialize their training, and therefore hours of work, in different occupations.