The return to firm-specific skills and industry-specific skills:
An empirical analysis based on LEED
Fátima Suleman, Francesca Sgobbi♣
♣
DIMI, University of Brescia, Brescia (I) and DINÂMIA-CET, ISCTE-IUL, Lisbon (P)
Corresponding author
e-mail: [email protected]
Dept. of Political Economy and DINÂMIA-CET, ISCTE-IUL, Lisbon (P)
e-mail: [email protected]
Abstract
The concept of skill transferability provides useful insights for understanding firm wage
policies and wage distribution across different firms and industries. Our paper builds up
on the debate on skill transferability in order to appraise the value attached by employers to firm-specific skills and industry-specific skills. Based on “Quadros de Pessoal”, a
longitudinal archive of linked employer-employee data on the Portuguese labour market, we develop and empirical analysis focused on retail bankers in the banking sector.
Our results support the existence of a wage premium for both firm-specific and industry
specific skills. The sizable wage premium attached to firm-specific skills suggests that
banking firms reflects at least to a certain extent the characteristics of internal labour
markets. Nevertheless, the existence of a non-negligible return to industry-specific skills
hints the existence of more articulated wage policy systems.
1. Introduction
Over the past decades, the human capital theory has played an important role in our understanding of wage premia attached to specific types of skills (Becker, 1964). Depending on skill fungibility, the human capital theory discriminates between general skills,
useful in virtually all workplaces, and specific skills, required by selected firms only.
The opposition between general and specific skills provided support to models of the
labour market that long affected theoretical and empirical research on wage policies,
such as the internal labour market (Doeringer and Piore, 1971) or the signalling theory
(Spence, 1973).
1
Nevertheless, the radical opposition between general and specific skills has been
repeatedly questioned by literature. Stevens (1994) points out the role of transferable
training that results in skills whose value is recognised by more than one employer.
Neal (1995) supports the existence of industry-specific skills by proving that, contrary
to displaced employees who find a new job in a different industry, the return to predisplacement tenure of employees who find a new job in the same industry is comparable to cross-section estimates of the returns to current seniority. Gibbons and Waldman
(2004) identify task-specific skills that generate wage cohort effects in the labour market and shape career paths within and between organisations. In addition, the skillweights approach proposed by Lazear (2003) suggests that the firm-specific nature of
skills stems from peculiar combinations of otherwise general skills. Despite significant
differences in theoretical and empirical focuses, all the mentioned approaches share the
intuition that the usefulness of an employee’s skills goes beyond the borders of a specific firm and that subsequent employers may profit from the capabilities developed by
their employees before recruitment by recombining them into new jobs.
This paper builds up on the debate on skill transferability across firms in order to
appraise the value attached by employers to firm-specific skills and industry-specific
skills. In labour markets where employment relationships are characterised by shortening tenures and inter-industry development of career paths, the concept of skill transferability promises to provide useful insights for understanding firm wage policies and
wage distribution across different firms and industries.
The identification of industry-specific skills as an intermediate category between
general and firm-specific skills points out a market for transferable skills between the
opposite categories of internal and the external labour markets. The concept of industryspecific skills consequently allows to qualify the evolution of Internal Labour Markets
(ILMs) towards either competitive solutions or still partially protected and institutionalised arrangements.
The banking industry, highly regulated in past years and more recently exposed
to intense institutional, technological and organisational change (Frey and Croce, 2001;
Gelade and Ivery, 2003), provides a suitable example of an industrial sector whose
firms traditionally organised as ILMs (Seltzer and Frank, 2007; Eriksson and Werwatz,
2005; Seltzer and Merrett, 2000) and more recently moved towards more competitive
solutions. The large diffusion of individualised employment relationships (Gelade and
Ivery, 2003) and the processes of skill restructuring and diversification which followed
the important technological and institutional changes over the last 30 years (Ingham and
Thompson, 1993; Buzzacchi et al., 1995; Sparrow, 1996) make banking firms an interesting case study to appreciate the evolution of ILMs and their permeability over time.
2
By assessing the wage premia attached to the persistence of ILMs and the rewards for
firm switchers who stay within the banking industry rather than moving to a different
industry, this paper aims at qualifying the nature of labour markets in a formerly highly
regulated industry.
Our empirical analysis of the value attached to firm-specific and industryspecific skills bases on Quadros de Pessoal, a longitudinal archive of linked employeremployee data (LEED) on the Portuguese labour market that allows for the identification of an employee’s career across years and across subsequent employers. With the
aim of limiting the variance in skills among the observed empoyees, hence in wages and
career opportunities, we restrict our analysis to retail bankers, who constitute the bulk of
workforce at bank agencies by performing both front-office and back-office tasks. The
time framework covered by the QP database spans from 1986 to 2008. However, in order to avoid possible biases due to the significant institutional changes which affected
the Portuguese banking system during the last 15 years of the past century, our analysis
focuses on the period between 2002 and 2008.
The rest of the paper is organised as follows. Section 2 surveys the literature on
general, firm-specific and transferable skills and outlines the research hypotheses. Section 3 presents the matched employer-employee data used in the empirical analysis and
presents the empirical methodology. Section 4 presents the empirical evidence and Section 5 draws the preliminary conclusions from this study.
2. Literature survey
Appropriate skills are recognised as crucial for firm performance. However, it is less
clear how firms should solve the trade off between acquiring those skills from the external labour market by hiring appropriately endowed employees and developing them
internally through employee training.
The model of the Internal Labour Market (ILM) supports an internal solution to
the above mentioned trade-off. Originally described by Doeringer and Piore (1971),
ILMs are characterised by a limited number of ports of entry, which give access to internal career paths and encourage long-term employment relationships. Thanks to onthe-job training and the internalisation of organisational norms, employees in ILMs develop those firm-specific skills and culture that support their progression along subsequent job ladders and internal hierarchies. The firm-specific nature of required skills
and the location of ports of entry at the bottom of the organisation hierarchy favour career progression of internal employees against the recruitment of external candidates
and provide firms with the opportunity to screen an employee’s capabilities before assignment to a new job. Employment security and internal career paths partially shield
3
employees from the turbulence of the external labour market. This feature reflects in
wages attached to jobs rather than individuals, as wages defined by administrative rules
protect employees from the earnings variation of competitive labour markets, where the
labour effort is rewarded at the value of its marginal product.
Nevertheless, the existence of “perfect” ILMs has been denied since their very
initial conceptualisation (Doeringer, 1967; Doeringer and Piore, 1971). If empirical tests
usually support the basic stylised facts of ILMs, they also recognise significant deviations from the standard model (see e.g. Creedy and Whitfield, 1988; Baker et al., 1994;
Treble et al., 2001; Eberth, 2003; Grund, 2005 Eriksson and Werwatz, 2005). Acknowledging that substantial entries from the external labour market take place at all hierarchical levels also in ILMs (Hassink and Russo, 2008; Lima and Centeno, 2003), recent
empirical studies have focused on the degree of permeability of internal labour markets,
rather than the existence of ILM as a pure model (Seltzer and Frank, 2007; Hassink and
Russo, 2008; Chan, 1996). Some authors recognise that the permeability of ILMs is a
consequence of the dynamic interaction between forces in the external (labour) market
and the internal (wage) policy of the firm (Lazear and Oyer, 2004). The need to cope
with or to anticipate pressures from the external environment is recognised by Lazear
and Oyer (2004) as a source of within-job wage dispersion.
The opposition between the general skills of external candidates and the firmspecific skills provided by internal ones, which mirrors the dichotomy between general
and specific skills outlined by Becker (1964), has long been regarded as a key-feature of
ILMs. However, this radical opposition has been questioned by subsequent studies.
Piore (2002) casts doubts about the relationship between skill specificity and ILMs, arguing that a large share of the skills required by firms organised as ILMs “are trivial or
change with each make and model of the product, making them short-lived” (p.274).
Other forces exerted by institutional actors internal and external to the workplace, such
as trade unions or local communities, may as well explain the establishment and the
consolidation of ILM rules and procedures (Piore, 2002). Stevens (1994) claims the existence of an intermediate category of “transferable skills” whose applicability, despite
restricted to a limited cluster of employers, spans beyond the borders of a single firm. A
different definition is proposed by Kletzer (1996), who describes transferable skills as
skills valued within an industry or sector. The skill-weights approach proposed by
Lazear (2003) suggests that all skills have a general nature, yet the special combination
of skills required to perform a particular task at a certain workplace turn them into specific skills.
The first attempts to quantify the wage impact of transferable skills dates back to
the mid-1990s. The natural set to test the impact of skill transferability on wages is usu-
4
ally recognised in job mobility, especially when involuntary. The wage differential paid
to the same employee by two different employers is claimed to reflect the difference in
the value recognised to the same set of skills in two different workplaces. Neal (1995)
proves that, contrary to displaced employees who find a new job in a different industry,
the return to pre-displacement tenure of employees who find a new job in the same industry is comparable to cross-section estimates of the returns to current seniority. Kletzer (1996) shows that the reward for transferable skills varies with the destination industry. The empirical results reported by Weinberg (2001) suggest that the recruitment of
experienced workers endowed with industry-specific skills is less sensitive to industry
shocks than in the case of younger workers.
The impact of transferable skills has been tested also on longitudinal datasets.
Parent (2000) finds empirical evidence on the stronger impact of industry-specific skills
compared to firm-specific skills on the wage of younger and older employees. Gibbons
and Waldman (2004) argue that task-specific skills generate wage cohort effects in the
labour market and shape career paths within and between organisations.
3. Data and methodology
The LEED used in the empirical assessment of the return to firm-specific and
industry-specific skills in the Portuguese banking industry are provided by Quadros de
Pessoal, a longitudinal dataset that includes the population of Portuguese firms with at
least one wage earner and their employees in manufacturing and services private sectors
(for details, see Cardoso and Portugal, 2005; Mamede, 2006). Data are collected annually by the Portuguese Ministry of Employment. Information on employers includes location, industry, firm age, turnover, number of employees, capital stock amount and
composition, number of local units, and labour collective agreement in force. Information on employees concerns employer, age, gender, education, occupation based on the
Portuguese national dictionary of occupational titles, job and job grade coded according
to the labour agreement in force, recruitment date, basic wage, overtime pay, additional
regular and irregular pay, type of job contract, regular working hours and overtime.
Thanks to unique employer and employee codes, Quadros de Pessoal allows matching
employer and employee information and mapping employees’ careers in time across
subsequent employers.
Quadros de Pessoal records 52,318 unique individuals employed at least once as
retail bankers between 2002 and 2007, for a total of 164,740 observations in the examined six years. For the purpose of the following analysis, the information available each
year on retail bankers in employment was matched with information on the employment
situation of the same worker for the following year. Our empirical dataset consequently
5
consists of pooled data on workers employed as retailed bankers at a Portuguese banking firm in any year between 2002 and 2007 and still in employment the following year.
The resulting database provides information on the employment status of the observed
employees in two subsequent years, complemented with time-variant and non timevariant characteristics of employees and their employers. In 14,921 cases, an employee
observed in a certain year was not recorded in the database the following year1. Therefore, we have 148,819 observations concerning retail bankers in Portugal between 2002
and 2007 who were still in employment the following year. Removing all observations
that had missing data on any of the relevant variables, we were then left with 146,318
observations.
The detailed information included in the database looks suitable for assessing the
return to firm-specific and industry-specific skills. Literature usually assumes tenure
with an employer as a proxy for firm-specific skills, while total experience in an industry proxies for industry-specific skills (Neal, 1995; Parent, 2000). However, also excluding the severe problems of endogeneity of tenure with industry experience due to
the joint inclusion of those two variables among regressors (Parent, 2000), Quadros de
Pessoal allows for an accurate calculation of industry experience only for employees
who entered the labour market after 19892. Due to this limitation, we assess the return to
firm-specific and industry-specific skills by focusing on the wage premia corresponding
to changes in the employment relationship. More in detail, our empirical strategy can be
specified by equation (1).
ln ω it1 − ln ω it0 = ln
ω it
= β 0 + β 1∆Status i (t −t ) + X it β 2 + ε i
ω it
1
1
0
0
(1)
0
The indexes t0 and t1 denote, respectively, the base year and the subsequent year,
ωi is the gross hourly wage of employee i (2002 euros), ∆Statusi is a dummy variable
which captures the return to either firm-specific or industry-specific skills, Xi is a vector
of control variable and εi represents the error term.
When equation (1) is estimated for the whole sample, ∆Statusi takes value 1 if a
change of employer is recorded between t0 and t1. Positive values of β1 signal a relative
advantage of firm switchers against firm stayers, hence the absence, or low importance,
of ILMs. On the contrary, negative values of β1 signal the convenience of internal career paths against external ones. When equation (1) is estimated for the sub-sample of
firm switchers, ∆Statusi takes value 1 if the employee moves outside the banking indus1
Missing observations are due to exit from the database due to retirement, unemployment or entry to the
public sector.
2
The records of Quadros de Pessoal start in 1986. However, before 1989 listed employees ampunt to
about two thirds of total employment declared by firms.
6
try and 0 if the new job still takes place within the banking sector. Also in this case
positive values of β1 signal a relative advantage of industry switchers against industry
stayers, hence the low importance of industry-specific skills. On the contrary, negative
values of β1 signal the willingness of competitor banks to pay for transferable skills.
The opportunity of detecting the return to firm-specific and industry-specific
skills through the wage premia or losses associated with employer changes becomes apparent when observing the sample summary statistics provided in Table 1. Firm stayers
and firm switchers and, among the latter, industry stayers and industry switchers significantly differ across virtually all the listed variables. Interestingly enough, the initial
hourly wage is on average much lower for firm switchers than for firm stayers and the
change of employer on average compensates for the disadvantage of the former group.
However, when we disentangle the wage effect of firm change for retail bankers who
stayed in the banking industry and for those who moved to another sector, we can see
that no significant difference exist among initial wages, yet industry stayers enjoy a sizable wage increase, while industry switchers suffer on average a consistent wage loss.
Table 1
Mean Sample Characteristics
Total
Firm
Firm
sample
stayers
switchers
Real hourly wage in t0 (€2002)
9.636
9.656
8.849
Change in real hourly wage (t1 – t0)
0.485
0.495
1.593
Hours worked per month
151.640
151.658
150.872
Tenure in t0
10.394
10.492
4.901
Experience in t0
18.183
18.334
12.179
Years in school
13.047
13.024
13.980
Female employees
0.494
0.457
0.447
Age
37.230
37.357
32.159
Number of observations
146,318
142,744
3,574
(a) Significance of t-tests between Firm stayers and Firm switchers
(b) Significance of t-tests between Industry stayers and Industry switchers
(a)
***
***
***
***
***
***
***
***
Industry
stayers
8.889
2.588
151.357
5.139
12.368
14.039
0.433
32.407
2,619
Industry
switchers
8.740
-1.133
148.452
4.247
11.661
13.817
0.486
31.477
955
When estimating the return to both firm-specific skills and industry-specific
skills, the variable ∆Statusi is probably endogenous with the observed increase in relative wage. As a matter of fact, the distribution of the decision to change employer and,
conditioned to this initial choice, of moving to another industry could be affected by
unobserved factors such as individual ability or personal attitudes that may significantly
impact on the wage negotiated with the new employer. Due to this constraint, equation
(1) is estimated by means of 2-Stage Least Squares3. In the case of the whole sample,
3
Angrist (1991) provide evidence about the limited bias caused by instrumenting binary endogenous regressors with 2SLS procedures.
7
(b)
***
***
***
**
*
***
***
when the potentially endogenous variable represents the return to firm-specific skills,
∆Statusi is instrumented by the turnover rate at the original firm. While not affecting individual ability, the turnover rate observed by an employee may reasonably affect
his/her willingness to move to a different employer. When estimating equation (1) for
the sub-sample of firm switchers, ∆Statusi represents the return to industry-specific
skills. In this case we chose to instruments the endogenous variable with the number of
bank agencies in an employee’s district (NUTS2 region), which proxies for the opportunity to find a job at the branch of another bank, and with a dummy variable that signals the merge between the original firm and another banking firm, which signals a
change in the organisational routines and procedures at the original workplace.
The control variables in equation (1) include tenure and squared tenure in t0,
gender, two dummies for educational qualification in t0, three dummies for end job in t1,
two dummies signalling promotion to a higher job or demotion to a lower job between t0
and t1, binary variables for temporary contract and part-time contract in t1, logarithm of
firm size in t1, logarithm of plant size in t1 and logarithm of difference in plant size between t0 and t1. Control variables include also five dummies for year fixed effects. Table
2 reports the descriptive statistics for all the variables used in the empirical analyses
presented in the next Section.
4. Empirical results
Table 3 reports the OLS estimate and the 2SLS estimate of equation (1) for the whole
sample and Table 4 reports the results of the same estimates for the sub-sample of firm
switchers.
The OLS estimate of the determinants of wage growth for the whole sample
(Table 3) show the existence of a significant and positive wage premium for firm
switchers. However, the sign and the size of the coefficient dramatically change when
the binary endogenous regressors is instrumented with the turnover at the original firm.
The significant and negative coefficient displayed by firm_switcher in the 2SLS estimate of Table 3 suggests that, after controlling for the unobservable individual characteristics that affect the decision of moving to another firm, staying with the same employer involves a higher wage growth. This finding supports the vision of banking firms
as internal labour markets that foster the retention of their core employees’ firm-specific
skills by distributing higher wage increases than those expected in the external labour
market for workers with similar characteristics. This finding also suggests that firm
switchers are credited with larger wage increases because of their intrinsic characteristics rather than because of the mere choice of moving to a different employer.
8
Table 2
Variables used in the empirical analysis
Variable description
Difference in logarithm of wage between t0 and t1
Dependent variable
Binary var. = 1 for firm switchers between t0 and t1
Binary var. = 1 for industry switchers between t0 and t1
Binary var. = 1 for female employees
Tenure in t0 [years]
Squared tenure in t0 [years]
Binary var. = 1 for qualification up to basic education
Binary var. = 1 for qualification equal to high school
Binary var. = 1 for qualification equal to tertiary education
Binary var. = 1 for promotion to a higher job between t0 and t1
Binary var. = 1 for demotion to a lower job between t0 and t1
Binary var. = 1 for job as top manager in t1
Binary var. = 1 for job as manager in t1
Binary var. = 1 for job as supervisor in t1
Binary var. = 1 for job as professional in t1
Binary var. = 1 for job as qualified employee in t1
Binary var. = 1 for job as semi-qualified employee in t1
Binary var. = 1 for elementary job in t1
Logarithm of firm size in t1
Logarithm of plant size in t1
Logarithm of difference in size of plant between t0 and t1
Binary var. = 1 for temporary contract in t1
Binary var. = 1 for part-time contract in t1
146,318 observations
Variable
µ
σ
0.049
0.173
Firm_switcher
0.024
Industry_switcher
0.007
Gender
0.494
Tenure
10.394
Squared_tenure
185.811
0.164
Basic_education
0.502
High_school
Tertiary_education
0.333
Promotion
0.101
Demotion
0.064
Topmanager_t1
0.047
Manager_t1
0.049
Supervisor_t1
0.010
Professional_t1
0.203
Qualified_t1
0.585
Semiqualified_t1
0.105
Elementary_t1
0.001
Ln_firmsize_t1
8.409
Ln_plantsize_t1
3.223
0.011
Ln_∆plantsize
Temporary_t1
0.036
Part_time_t1
0.002
0.155
0.081
0.500
8.819
261.787
0.371
0.500
0.471
0.301
0.245
0.212
0.216
0.100
0.402
0.493
0.306
0.035
1.148
1.882
0.825
0.188
0.047
∆Ln_wage
When the analysis focuses on firm leavers, both the estimates reported in Table
4 support the existence of a significant penalisation in wage change for industry switchers. Despite downsized in absolute value, the coefficient of industry_switcher remains
significant and negative also after controlling for unobserved heterogeneity among employees moving to a different firm. This finding supports the existence of a market for
industry-specific transferable skills among Portuguese banking firms. The wage premium recognised by new employers in the banking industry compared to other sectors
suggests that retail bankers transfer to their new workplaces skills and competences
whose value is recognised within the borders of their original sector, but not beyond
them.
The comparison between Tables 3 and 4 provides interesting insights also about
the different role played by control variables in driving wage growth for the whole sample of retail bankers and for the sub-sample of firm switchers. First, tenure with the
original employer has a negative and significant impact on the wage growth of retail
bankers in the whole sample, while the coefficients of tenure and squared tenure turn
non significant when the analysis is restricted to firm switchers. For the whole sample,
9
the pattern of wage growth marginally decreasing with tenure reflects a wage hierarchy
whose ceiling is set by collective agreement at the firm level or, as in the case of the
Portuguese banking industry, at the national level. In the case of firm switchers, the non
significant impact of tenure on wage growth may reflect the difficulty of exploiting
firm-specific skills in a new workplace.
Table 3
The determinants of wage growth - Whole sample
OLS
Std. Error
0.004
0.003
0.001
0.000
0.000
0.001
0.002
0.002
0.002
0.002
0.002
0.004
0.001
0.002
0.013
0.000
0.000
0.001
0.002
0.010
Yes
2SLS
Std. Error
0.017
0.065
0.001
0.000
0.000
0.002
0.002
0.005
0.005
0.003
0.003
0.005
0.001
0.003
0.020
0.002
0.000
0.001
0.005
0.013
Yes
β
β
Constant
0.030
***
0.193
Firm_switcher
0.068
***
-0.562
Gender
-0.005
***
-0.007
Tenure
-0.004
***
-0.005
Squared_tenure
0.000
***
0.000
High_school(a)
-0.006
***
-0.009
Tertiary_education(a) -0.005
***
-0.011
Promotion
0.053
***
0.101
Demotion
0.006
***
0.043
Topmanager_t1(b)
-0.012
***
-0.017
Manager_t1(b)
0.007
***
0.013
-0.014
***
-0.027
Supervisor_t1(b)
Professional_t1(b)
0.015
***
0.016
Semiqualified_t1(b)
0.001
-0.019
Elementary_t1(b)
-0.266
***
-0.134
Ln_firmsize_t1
0.008
***
-0.009
Ln_plantsize_t1
-0.002
***
-0.001
0.007
***
0.004
Ln_∆plantsize
Temporary_t1
-0.045
***
-0.003
Part_time_t1
0.066
***
0.139
Year fixed effects
Adj R2
0.119
0.091
F-test 821.729 ***
607.187 ***
145,263
# obs. 146,318
Dependent Variable: ∆Ln_wage; *** p < 1%, ** p < 5%, * p < 10%
(a)
Baseline: Basic education
(b)
Baseline: Job as qualified employee in t1
***
***
***
***
***
***
***
***
***
***
***
***
***
***
***
***
***
***
***
Job promotion and job demotion provide additional examples of control variables that display a different impact on wage growth for the whole sample and for firm
switchers only. In the case of firm switchers the coefficients of two dummies display intuitive signs, positive for Promotion and negative for Demotion respectively. However,
in the estimates for the whole sample both coefficients are positive and significant. In
line with the findings of other empirical studies on the banking industry (Seltzer and
Frank, 2007), this piece of evidence supports the hypothesis that individual career paths
within internal labour markets are not necessarily bound to official hierarchies of jobs
10
and that wage growth may compensate for job re-assignment to a lower hierarchical role
reflecting internal organisational needs.
The estimates for the whole sample and the sub-sample of firm switchers differ
also in the case of the binary regressors measuring the educational attainments of the
observed retail bankers. If firm switchers show growing returns to their investment in
education, the estimates for the whole sample display a relative advantage for less educated employees. This outcome provides additional evidence about the existence of internal labour markets in Portuguese banking firms where firm-specific skills developed
on-the-job substitute for formal education.
Table 4
The determinants of wage growth – Firm switchers
OLS
Std. Error
0.034
0.016
0.014
0.003
0.000
0.030
0.030
0.015
0.022
0.047
Yes
2SLS
Std. Error
0.051
0.122
0.015
0.005
0.000
0.033
0.034
0.016
0.033
0.090
Yes
β
β
Constant
0.102
***
0.048
Industry_switcher
-0.455
***
-0.284
Gender
-0.011
-0.018
Tenure
-0.006
*
0.000
Squared_tenure
0.000
0.000
High_school(a)
0.107
***
0.126
0.122
***
0.141
Tertiary_education(a)
Promotion
0.125
***
0.117
Demotion
-0.117
***
-0.151
Part_time_t1
-0.173
***
-0.281
Year fixed effects
Adj R2
0.274
0.135
F-test
97.279 ***
40.846 ***
3,574
3,574
# obs.
Dependent Variable: ∆Ln_wage; *** p < 1%, ** p < 5%, * p < 10%
(a)
Baseline: Basic education
(b)
Baseline: Job as qualified employee in t1
**
***
***
***
***
***
5. Concluding remarks
Most of the previous studies on the return to skill transferability have focused on industry-specific skills, with the notable exception of Parent (2000) who outlines the significant impact of both firm-specific and industry-specific skills on wage. In line with Parent’s research, our paper has provided additional evidence of the impact of both industry-specific and firm-specific skills on the wage growth of Portuguese retail bankers.
After controlling for unobserved individual heterogeneity and ceteris paribus, our results show the existence of significant wage premia for firm stayers against firm switchers and, among the latter, for industry stayers against industry switchers. If the former
11
can be interpreted as the value recognised by employers to firm-specific skills, the latter
corresponds to the reward for industry-specific skills.
The significant return to firm-specific skills, coupled with evidence about the
impact of tenure on wage growth and the substitutability between formal education and
on-the-job experience for firm stayers, support the presence of ILMs at Portuguese
banking firms. At the same time, the wage premium recognised to industry-specific
skills witnesses the existence of a market of transferable skills among competitors in the
banking sector and suggests barriers to inter-industry mobility of employees (Weinberg,
2001). As a matter of fact, the provided evidence signals a trade-off between institutionalised and competitive wage formation processes. If firm-specific skills generate protected labour markets, industry-specific skills are expected to increase rivalry among
close competitors in the market for transferable skills.
Acknowledgments
We thank the Portuguese DGEEP – Ministry of Labour and Social Security for access
to Quadros the Pessoal. We are also grateful to DGEEP staff for additional information
on the dataset. Financial support from FLEX FCT grant PTDC/EGE-ECO/108547/2008
and Fondo di Ateneo ex-60% UniBS is gratefully acknowledged.
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