Specificity of Human Capital: An Occupation Space Based on Job-to-Job Transitions

Specificity of Human Capital: An Occupation Space Based on Job-to-Job Transitions

CID Faculty Working Paper No. 379

Eduardo Levy Yeyati and Martín Montané
April 2020 (Revised May 2020)

Abstract:

Using job transition data from Argentina’s Household Survey, we document the extent to which human capital is specific to occupations and activities. Based on workers’ propensity to move between occupations/industries, we build Occupation and Industry Spaces to illustrate job similarities, and we compute an occupation and industry similarity measures that, in turn, we use to explain wage transition dynamics. We show that our similarity measures influence positively post-transition wages. Inasmuch as wages capture a worker's marginal productivity and this productivity reflects the degree to which a worker matches the job’s skill demand, our results indicate that a worker's human capital is specific to both occupation and activity: closer occupations share similar skill demands and task composition (in other words, demand similar workers) and imply a smaller human capital loss in the event of a transition.