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Uncertainty and the specificity of human capital

Uncertainty and the specificity of human capital
Uncertainty and the specificity of human capital
This paper studies the choice between general and specific human capital. A trade-off arises because general human capital, while less productive, can easily be reallocated across firms. Accordingly, the fraction of individuals with specific human capital depends on the amount of uncertainty in the economy. Our model implies that while economies with more specific human capital tend to be more productive, they also tend to be more vulnerable to turbulence. As such, our theory sheds some light on the experience of Japan, where human capital is notoriously specific: while Japan benefited from this predominately specific labor force in tranquil times, this specificity may also have been at the heart of its prolonged stagnation.
uncertainty, labor contracts, specific human capital
0966-4246
713
University of Southampton
Gervais, Martin
c03b188f-08e2-42a6-abca-b64b362a4065
Livshits, Igor
4de7f256-aae3-4c1d-8c6e-61acc4484f4e
Meh, Cesaire
f230df56-d867-4944-936f-e5edfdac2f4e
Gervais, Martin
c03b188f-08e2-42a6-abca-b64b362a4065
Livshits, Igor
4de7f256-aae3-4c1d-8c6e-61acc4484f4e
Meh, Cesaire
f230df56-d867-4944-936f-e5edfdac2f4e

Gervais, Martin, Livshits, Igor and Meh, Cesaire (2007) Uncertainty and the specificity of human capital (Discussion Papers in Economics and Econometrics, 713) Southampton, UK. University of Southampton 43pp.

Record type: Monograph (Discussion Paper)

Abstract

This paper studies the choice between general and specific human capital. A trade-off arises because general human capital, while less productive, can easily be reallocated across firms. Accordingly, the fraction of individuals with specific human capital depends on the amount of uncertainty in the economy. Our model implies that while economies with more specific human capital tend to be more productive, they also tend to be more vulnerable to turbulence. As such, our theory sheds some light on the experience of Japan, where human capital is notoriously specific: while Japan benefited from this predominately specific labor force in tranquil times, this specificity may also have been at the heart of its prolonged stagnation.

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More information

Published date: 31 October 2007
Keywords: uncertainty, labor contracts, specific human capital

Identifiers

Local EPrints ID: 49343
URI: http://eprints.soton.ac.uk/id/eprint/49343
ISSN: 0966-4246
PURE UUID: 3c82c76c-68c5-4ee6-ba6e-db0d4ab00ddb

Catalogue record

Date deposited: 31 Oct 2007
Last modified: 09 Nov 2021 09:12

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Contributors

Author: Martin Gervais
Author: Igor Livshits
Author: Cesaire Meh

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