TY  - JOUR
AU  - Neumark,David
AU  - Taubman,Paul
TI  - Why Do Wage Profiles Slope Upwards? Tests of the General Human Capital  Model
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4688
PY  - 1994
Y2  - March 1994
UR  - http://www.nber.org/papers/w4688
L1  - http://www.nber.org/papers/w4688.pdf
N1  - Author contact info:
David Neumark
Department of Economics
University of California at Irvine
3151 Social Science Plaza
Irvine, CA  92697
Tel: 949-824-8496
Fax: 949/824-2182
E-Mail: dneumark@uci.edu

Paul Taubman
Department of Economics
University of Pennsylvania
Philadelphia, PA 19104
AB  - This paper tests some empirical implications of the general human capital model's explanation of rising wage profiles.  At the individual level, the model implies that there will be a negative relationship between the initial wage level and wage growth of young, inexperienced workers.  At the market level, the model implies that the present value of the wage profile of an investor equals that of an otherwise identical non-investor, or that the ratio of the present values equals one.  We test both of these hypotheses. Evidence on the wage level-wage growth tradeoff points to a negative relationship between initial wage levels and wage growth, even after correcting for negative biases that may have influenced existing estimates of this relationship.  Evidence on present values of wage profiles suggests that the ratio of the present value of rising wage profiles to flat wage profiles is quite close to one. Alternative estimates of this ratio are tightly clustered around one, and more often than not are insignificantly different from one. Overall, then, the evidence is largely consistent with the general human capital model.
ER  -