Occupational Human Capital and Wages: The Role of Skills Transferability Across Occupations

This paper examines the effect of accumulated human capital, and particularly occupational human capital, on the workers’ wages. Unlike previous studies that apply occupational tenure as a proxy for occupational human capital, this paper applies the concept of Shaw’s (1984) occupational human capital to capture the transferability of occupational skills and estimates a new measure of occupational human capital, so-called occupational investment. Using the National Longitudinal Survey of Youth (NLSY) from 1979 to 2000, the key findings of this paper suggest that occupational skills from the previous jobs can also affect the workers’ wages at the current job and that occupational investment is one of the important sources of wages supporting the Shaw’s original work on wage determination. Specifically, 5 years of (3-digit) occupational investment relative to current occupational tenure could lead to a wage increase of 7.7 to 18.4 %. I also find that the general labor market experience accounts for a large share of workers’ wages.