Earnings functions, specific human capital, and job matching: Tenure bias is negative

This article investigates the hypothesis that when measures of specific human capital ( such as job tenure) are included in earnings functions, there may be a sample selection bias because of job-matching effects because workers with high unobserved match quality receive and accept high wage offers. We develop a model for wage offers in a labor market characterized by both specific human capital and job matching. The model provides a theoretical basis for empirical earnings functions containing specific capital, and it demonstrates that sample selection bias reduces the estimated return to specific human capital and tenure.