Essays on the Role of Specific Human Capital

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2007-06-04

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Human capital theory states that workers' knowledge and skills increase their productivity and thus raise their earnings. An important dimension of human capital theory distinguishes between general human capital and specific human capital. Chapter Two and Chapter Three of this dissertation examine two groups of individuals who encounter interruptions in their work careers and cannot completely transfer their specific human capital to their new jobs.

Chapter Two investigates displaced workers who lose jobs due to mass layoffs by their employers. Their success in job transition depends partially on the extent to which their human capital can be carried over across jobs. The Chapter Two analysis adds to the extensive literature on the earnings cost of displacement by distinguishing the earnings losses between high technology (hi-tech) displaced workers and low-tech displaced workers. Earnings losses are estimated using a generalized difference-in-difference model which compares the earnings patterns of displaced workers with a comparison group of non-displaced workers. The empirical results demonstrate that earnings decline substantially upon displacement and then recover gradually. Hi-tech displaced workers suffer larger initial earnings losses and have faster recoveries than other displaced workers.

Chapter Three examines female immigrants to the U.S. whose entry wages fall short of those of comparable natives because their human capital accumulated in foreign countries is not completely transferable to the U.S. labor market. The entire literature on immigrant skills has focused almost exclusively on male immigrants. Chapter Three extends the previous research to the population of female immigrants by examining changes across cohorts in their labor market skills, as measured by their English proficiency, educational attainment and wages. The results show that, across successive cohorts of female immigrants, English proficiency at entry stays constant and average education level increases. After controlling for human capital and demographic characteristics, predicted wages are lower for female immigrants upon entry relative to female natives. Compared to male immigrants in the same period, female immigrants exhibit faster growth across cohorts in educational attainment and in predicted wages.

Overall, this dissertation provides further evidence of the role of specific human capital in explaining multiple dimensions of workers' earnings patterns.

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