Measuring the Specificity of Human Capital:a Skill-based Approach

This article will construct a skill-based measure for human capital specificity. The measure is based on the possibilities of making use of skills on the labour market, which depends on the number of jobs where any particular skill is required. The assumption is that the specificity of human capital depends on the specificity of skills. In order to calculate the levels of specificity of different skills empirically, data from the skill requirements of vacant jobs are used. The validity of this measure is tested by using it as an estimator of the probability that on-the-job training is offered to employees. This article also investigates differences in the specificity of required human capital between different industries and occupations. The proposed job specificity measure can be used for planning public sector support to on-the-job training as companies’ decisions to pay for training depend on the specificity of human capital required.