Firm-Specific Human Capital: A Skill-Weights Approach

32 Pages Posted: 12 Jul 2003

See all articles by Edward P. Lazear

Edward P. Lazear

Stanford Graduate School of Business; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: June 2003

Abstract

One problem with the theory of firm-specific human capital is that it is difficult to generate convincing examples of investment that could generate the sometimes observed large and continuing effects on earnings. Another approach, called the "skill-weights" view, allows all skills to be general in that there are other firms that use the each of the skills. But firms use them in different combinations and with different weights attached to them. The skill-weights view not only has aesthetic appeal, but is consistent with the frequently observed large tenure effects. All of the implications of the traditional view are produced by this approach, and there are a number of other implications that distinguish the new view from the traditional one. The empirical evidence already contains some support for the skill-weights view.

Keywords: Human Capital, Skills, Skill-weights

JEL Classification: M5, J24

Suggested Citation

Lazear, Edward P., Firm-Specific Human Capital: A Skill-Weights Approach (June 2003). Available at SSRN: https://ssrn.com/abstract=422562 or http://dx.doi.org/10.2139/ssrn.422562

Edward P. Lazear (Contact Author)

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