Human Capital and the Business Cycle Effects on the Postgraduate Wage Premium

Ran Gu ()

Review of Economic Dynamics, 2023, vol. 48, 345-376

Abstract: Postgraduate degree holders experience lower cyclical variation in real wages than those with undergraduate degrees. Moreover, postgraduate jobs require more specific human capital. Using an equilibrium search model with dynamic incentive contracts, this paper attributes the cyclicality of the postgraduate-undergraduate wage gap to the differences in specific capital. Greater specific capital leads to lower mobility, thereby improving risk-sharing between workers and firms. The estimates of the model reveal that specific capital can explain the differences both in labour turnover and in real wage cyclicality between education groups. (Copyright: Elsevier)

Keywords: Real wage cyclicality; Education; Wage premium; Specific human capital; Wage contract; Search (search for similar items in EconPapers)
JEL-codes: E24 E32 I24 J31 J41 J64 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1016/j.red.2022.07.001

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