Abstract
The main purpose of this study is to investigate the existence and importance of industry-specific human capital in Taiwan based on the 1995-2004 Taiwan’s Manpower Utilization Quasi-Longitudinal Survey (MUQLS) dataset. We analyze the difference in the returns of experience and tenure received by industry switchers and industry stayers, and determine the industry-specific human capital indirectly according to Neal (1995)’s concept of wage change. Furthermore, we use ordinary least squares model to estimate wage equation and apply Heckman’s two-stage procedure in wage estimation to correct for the possible bias due to the decision of industry switching. The estimation results indicate that industry-specific human capital exists in Taiwan, and switching industry can cause wage difference betweem switchers and stayers. Switchers have lower average post-displacement wage than stayers. For stayers, they can obtain higher rewards by accumulating industry-specific human capital. The investment of industry-specific human capital can affect the wage returns, and this will indirectly influence the decision of industry switching. Therefore, a worker’s decision of switching industry not only results in wage change, but also affects his/her placement decision in labor market.