PRODUCT CHARACTERISTICS, HUMAN CAPITAL, AND LABOR MARKET SEGMENTS:

This article contends that one key to understanding different forms of work organization lies in the nature of the products being created. Product characteristics are proposed to be critical determinants of the type of human capital, either general or firm specific. Following from prior theory, labor market barriers develop based on type of human capital. These barriers then have a direct bearing on employee rewards. The nature of the product distinction is captured with a comparison of two product-types (goods and services) conceived as theoretically distinct. General skills are hypothesized to be more important in the service-producing sector, while firm-specific skills are hypothesized to be more important in the goods-producing sector. Empirical analyses using the 1991 General Social Survey compare workers in the service-producing and goods-producing sectors to illustrate differences in the salience of firm-specific and general skills. Two hypotheses are supported. Firm-specific skills have a stronger effect on earnings in manufacturing industries than in service industries. Also, skills acquired from on-the-job training, when compared with other skills, are more weakly related to service employee rewards. These distinctions between sectors suggest insights into structures unique to the service employment workplace.     

LIFETIME UNCERTAINTY, HUMAN CAPITAL AND PHYSICAL CAPITAL

This paper demonstrates that the non-inheritability of human capital makes investment in it fundamentally different from investment in physical capital when lifetime is uncertain. A simple two-period model is used to highlight the effect of lifetime uncertainty on the optimal investment in human capital with and without markets for life insurance.     

WAGE REDUCTION, UNEMPLOYMENT AND SPECIFIC HUMAN CAPITAL

This paper re-examines the specific human capital hypothesis concerning short-run employment variation to analyze the circumstances in which wage reductions and/or layoffs will occur. By relaxing the usual assumption of downward wage rigidity, we show that the specificity of training influences the attractiveness of wage reduction compared to job separation. The choice of adjustments is analyzed and implications are drawn concerning the impact of the level of specific skill and of other factors on the choice and on the magnitude of such wage reductions as occur. These implications are tested with data on the Seattle recession of 1970-72.     

DISCRIMINATION, BAYESIAN UPDATING OF EMPLOYER BELIEFS, AND HUMAN CAPITAL ACCUMULATION

This article proposes a dynamic labor market discrimination model based on Bayesian updating of beliefs by the employer. The employer forms initial beliefs of worker ability conditional on group and updates his beliefs each period based on observed output. Inaccurate initial priors lead to diminished human capital investment among members of the undervalued group and may generate inequities lasting many periods or even permanently. Statistical discrimination models in which differing variances drive the inequity are special cases of the model.