DP1124 The Sharing Hypothesis for Specific Human Capital

Author(s): Margaret Stevens
Publication Date: December 1994
Keyword(s): Contracts, Sharing, Specific Human Capital, Tenure
JEL(s): J31, J41
Programme Areas: Human Resources
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1124

This paper examines the foundations of the prediction that the costs of, and returns to, an investment in specific human capital will be shared between worker and firm, and hence that in the presence of specific human capital there will be a positive relationship between wage and tenure. It is shown that the standard model does not in fact predict such a relationship. A more precise definition of sharing is suggested, and two models are described in which sharing does arise, in response to a problem of asymmetric information.