Industry-Specific Human Capital, Occupation and Firm Size: Evidence from Taiwan

Abstract

This paper investigates the importance of various types of human capital and highlights the role played by industry tenure in determining wages in Taiwan. It also aims to offer possible explanations as to why industry-specific human capital is much less significant than it is in the United States. Empirically, it is found that, other things being equal, accumulating industry tenure decreases earnings for both the least-skilled workers and those employed in mid-sized firms. Industry-specific skills are not yet deeply implemented in most occupations and firms of all sizes. This might also account for the remarkable level of labor reallocation among industries that is observed in Taiwan. Furthermore, the capital stock accumulated through education is found to be the most crucial in determining wages in all estimations and a factor considered the engine of growth during the miraculous development of Taiwan's economy. However, the importance of other types of human capital on earnings – namely, general labor market experience and firm-specific human capital, varies substantially across groups.