LEARNING, WAGE DYNAMICS, AND FIRM-SPECIFIC HUMAN-CAPITAL

We introduce a dynamic and fully strategic model of wage determination in the presence of firm-specific human capital. In this model, human capital is interpreted as information. We show that equilibrium exists and is efficient and that it gives rise to a unique distribution of t he social surplus. We show further that the equilibrium wage is determ ined by three factors. Consideration of these factors allows us to det ermine when and how the market mechanism enables the worker to capture some of the returns to firm-specific human capital, We relate our fin dings to the ongoing empirical debate concerning the return to tenure.