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Speci c Skills and the Business Cycle E ects on the Postgraduate Wage Premium
| Content Provider | Semantic Scholar |
|---|---|
| Copyright Year | 2017 |
| Abstract | This paper studies the business cycle e ect on the postgraduate wage premium. Using U.S. micro data, I show this wage premium is counter-cyclical the postgraduate wage is smoother than the bachelor wage over the cycle. I argue that speci c skill is the reason for this pattern. Empirical statistics show that postgraduates have longer training duration and higher displacement costs, indicating higher speci c skills. Using a contracting model featured with training, asymmetric information, and aggregate shocks, I show speci c skills reduce workers' outside options, increase their commitment in the match, and allow rms to better insure them against aggregate shocks. The model shows that speci c skills alone can explain the di erences in the turnovers and wage cyclicality between postgraduates and bachelors. The model also shows that postgraduates accept relatively lower starting wages, but the subsequent wage growth is faster. On the other hand, noncollege workers are more risk-averse, so they select into contracts with smoother wages. Once holding risk aversion equal, less educated workers get less wage insurance from rms. I also show that an increase in the unemployment insurance crowds out rm insurance, particularly for the postgraduates. Noncollege workers have the highest welfare gain from such a policy. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=SAEe2017&paper_id=631 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
