The Skill-Weights Approach on Firm Specific Human Capital: Empirical Results for Germany

In a recent paper Ed Lazear (2004) proposed the so called skill-weights view of firm-specific human capital. According to his theory all single skills are general but each firm may require a different combination of these single skills. The purpose of our paper is to test Lazear`s model using a large and very detailed data set, the BIBB/IAB Qualification and Career Survey. The paper focuses on firms` investments in human capital, which according to the skill-weights approach should depend on the specificity of the firm’s skill combination, on the breadth of the skill bundle, on the thickness of the external labor market and on the probability of separation. We estimate OLS regressions and poisson regression for count data. We find that all implications are borne out in the data.