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Learning, Wage Dynamics, and Firm-Specific Human Capital

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  • Felli, Leonardo
  • Harris, Christopher

Abstract

The authors introduce a dynamic and fully strategic model of wage determination in the presence of firm-specific human capital. In this model, human capital is interpreted as information. The authors show that equilibrium exists and is efficient and that it gives rise to a unique distribution of the social surplus. They show further that the equilibrium wage is determined by three factors. Consideration of these factors allows the authors to determine when and how the market mechanism enables the worker to capture some of the returns to firm-specific human capital. They relate their findings to the ongoing empirical debate concerning the return to tenure. Copyright 1996 by University of Chicago Press.

Suggested Citation

  • Felli, Leonardo & Harris, Christopher, 1996. "Learning, Wage Dynamics, and Firm-Specific Human Capital," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 838-868, August.
    • Handle: RePEc:ucp:jpolec:v:104:y:1996:i:4:p:838-68
    DOI: 10.1086/262044
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    References listed on IDEAS

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    1. Henry S. Farber & Robert Gibbons, 1996. "Learning and Wage Dynamics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(4), pages 1007-1047.
    2. repec:pri:indrel:dsp01mc87pq252 is not listed on IDEAS
    3. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-990, October.
    4. Joseph G. Altonji & Robert A. Shakotko, 1987. "Do Wages Rise with Job Seniority?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(3), pages 437-459.
    5. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-176, February.
    6. Kenneth Burdett & Dale T. Mortensen, 1989. "Equilibrium Wage Differentials and Employer Size," Discussion Papers 860, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    7. Abraham, Katharine G & Farber, Henry S, 1987. "Job Duration, Seniority, and Earnings," American Economic Review, American Economic Association, vol. 77(3), pages 278-297, June.
    8. Bertola, Giuseppe & Felli, Leonardo, 1993. "Job matching and the distribution of producer surplus," Ricerche Economiche, Elsevier, vol. 47(1), pages 65-92, March.
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