Inter-Industry Wage Differential and Specific Human Capital

A dynamic general equilibrium model with industry-specific human capital is developed to account for inter-industry wage differential and imperfect labour mobility. It is demonstrated that more human capital-intensive industries are more likely to pay higher wages, conditional on inter-industry differences in human capital depreciation rate and learning cost. In the light of internationally transferable technology, the model can also account for two empirical regularities, namely cross-occupation and cross-country correlation of inter-industry wage differential