Industry-Specific Human Capital and the Wage Profile: Evidence from Taiwan

Abstract

Using data from Taiwan’s Manpower Utilization Survey (1979-1999), this paper finds evidence that supports the industry-specific human capital effect on wage tenure profiles. We examine data on people who voluntarily or involuntarily change job within or across industries last year. Pre-switching work experience is used as an indirect measure for testing the industry-specific human capital by comparing the effect between stayers and movers. Other things being equal, holding firm tenure constant movers actually incur wage loss, measured by the wage premium of the work experience. However, the greater than average firm tenure effect, especially for movers in the voluntary group, reflects an underlying job-related matching process. It is mainly for this gain from better job match that overcomes the wage loss that \r\nstimulates cross-industry job change. We also find that the effect of general work experience declines with education, while the effect of industry-specific human capital increases with education. The experience of Taiwan’s labor market confirms the existence of industry-specific human capital, and the rapid voluntary job switching across industries is consistent with the search theory of job match.