The idea that wages rise relative to alternatives as job seniority accumulates is the
foundation of the theory of specific human capital, as well as other widely accepted theories of
compensation. The fact that persons with longer job tenures typically earn higher wages tends to
support these views, yet this çvidence ignores the decisions that have brought individuals to the
combination of wages, job tenure, and experience that are observed in survey data. Allowing for
sources of bias generated by these decisions, this paper uses longitudinal data to estimate a lower
bound on the avenge return to job seniority among adult men. I find that 10 years of current job
seniority raises the wage of the typical male worker in the U.S. by over 25 percent. This is an
estimate of what the typical worker would lose if his job were to end exogenously. Overall, the
evidence implies that accumulation of specific capital is an important ingredient of the typical
employment relationship, and of life-cycle earnings and productivity as well. Continuation of
these relationships has substantial specific value for workers.
*Published:
Journal of Political Economy, Vol. 99, pp.145-76, February 1991.
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