The productivity effect of government capital in developing and industrialized countries

This paper uses an aggregate production function to examine the effect of government capital formation on growth of labour productivity in an annual panel of 12 developing and 12 OECD economies covering the period 1976–1989. The results from a pooled model of all 24 countries indicate that contribution of government capital to labour productivity is positive and statistically significant. This result also holds in separate samples of the industrialized and developing economies where we find that, while there are productivity differentials between the two types of economies with respect to private capital, there are no differences with regards to public capital.     

Human capital in OECD countries: Technical change,efficiency and productivity

The aim of this paper is to analyse the role of human capital in the productivity gains of the OECD countries in the period 1965-90, breaking down the productivity gains into technical change and gains in efficiency. For this purpose we use both a stochastic frontier approach and a non-parametric approach (DEA) and calculate Malmquist indices of productivity. The results obtained indicate the existence of both a level effect (a higher level of human capital raises labour productivity) and a rate effect (a higher level of human capital affects positively the rate of technical change) associated with human capital. The differences among countries in endowments of human capital have worked against labour productivity convergence, since the richer countries, thanks to their greater endowment of human capital, have experienced higher rates of technical change.     

Anglo-German Productivity Differences: The Role of Broad Capital

This paper investigates the role of broad capital in explaining Anglo-German labour productivity differences in manufacturing, where broad capital includes physical capital, workforce skills and R&D expenditure. All three forms of capital are found to have a significant impact on relative productivity but only workforce skills have a coefficient greater than that implied by standard ‘growth accounting’ methods. This is interpreted as supporting the idea that there are some external effects from human capital formation which raise the productivity of all workers in an industry. After allowing for broad capital the results suggest that Britain had a multifactor productivity advantage over Germany in the late 1980s.     

Determinants of labour productivity: Comparison between developing and developed countries of Asia‐Pacific

The current study investigates the trends in labour productivity of the major developing and developed economies of the Asia‐Pacific region and examines its determinants over the period 1980–2014. The study analyses capital deepening, human capital, technology, share of agriculture in GDP, financial development, institutional quality, inflation as well as macroeconomic variables as potential determinants of productivity, and identifies the differences in the impact of these factors on the productivity of developing and developed countries. Using panel cointegration and group‐mean fully modified ordinary least squares estimation, the study finds that capital deepening, human capital, technology, institutional quality and macroeconomic variables (i.e. government size and openness) are significant determinants of labour productivity of both developing and developed economies of the Asia‐Pacific region. The study further finds that while both trade openness and foreign direct investment affect productivity of developing economies positively, only trade openness has a positive and significant impact on the productivity of developed economies. The share of agriculture in GDP affects the labour productivity of developing Asia‐Pacific economies significantly but not that of developed economies. Furthermore, capital deepening has a much higher impact on the productivity of developing Asia‐Pacific economies than that of developed economies.     

Sources of Australian Labour Productivity Change 1950–1994

This study examines sources of Australian labour productivity change from 1950 to 1994. Time-series data are used to estimate a model capturing the interaction between labour productivity, fixed capital, human capital, telecommunications, trade openness and international competitiveness. Attention is given to the time-series properties of these data. ADF tests for unit roots are employed, and the sensitivity of the tests to non-linear transformations and structural breaks are considered. Estimates suggest that policies that promote investment, economic integration and international competitiveness will improve short-run labour productivity. In the long run, fixed capital accumulation is the dominant source of productivity improvement.     

Innovation spending and productivity growth in the German economy 1980–1986

A newly developed technique involving vertically integrated input-output sectors is used to examine the relationship between labour productivity and innovation expenditures in the German economy during the period 1980 to 1986. The productivity measures used, dubbed Harrod-Robinson-Read (HRR), take into account the direct and indirect labour used in each consumption goods sector. Included in these measures is the labour content of new capital investment.

The HRR measures show higher rates of productivity growth in most sectors, compared to the simple direct labour requirements measures. This is due to the fact that the HRR measures take into account the increased efficiency with which new capital is produced. The second part of the study examines the relationship between labour productivity and innovation expenditures as measured by the IFO (Institute for Economic Research – Munich) innovation survey. Using cross section data for 58 German industries, a strong correlation was found between direct labour productivity growth and direct innovation expenditure.

These results suggest that with more detailed capital expenditure data it should be possible to describe more precisely the relationships between innovation activity, spending on new capital, and productivity changes. The key to examining these relationships in more detail is the growing wealth of information contained in recent innovation surveys such as those done by the IFO.     

Three levels of education and the economic growth

The aim of this article is to solve the question how the three main stages of education contribute to the labour productivity growth in selected 125 countries in the period 1999–2014. The model is based on the neoclassical production function enhanced with human capital. The authors draw on the Penn World Tables 9.0 and UNESCO databases. The key benefit of this article is that human capital is characterized according to the returns to education from average number of years of formal schooling at the primary, secondary and tertiary level. Based on the panel data analysis, the contributions of capital and of the three levels of education to the growth of labour productivity are estimated. At the same time, the model allows to estimate the contribution of total factor productivity. The results of the analysis show that tertiary education has the strongest impact on labour productivity across the considered economies. At the same time, the breakdown of aggregate human capital by level of education leads to better clarification of the effects of human capital and physical capital on labour productivity. The conclusions also indicate a tendency towards rising returns to scale induced by the secondary and tertiary education.     

New measures of factor productivity in Australia: a Sato approach

This article derives new results of the Elasticity of Substitution (ES) between capital and labour and factor productivity for Australia, an economy which experienced major economic reform that substantially increased the flexibility of its labour, product and capital markets throughout the 1980s and 1990s. It employs a Sato production function specification which has unique properties that enable the estimation of capital–labour substitution elasticity and changing marginal productivities through time. These estimates reveal that the substitution elasticity and labour productivity in Australia rose significantly from the mid-1960s and remained elevated during the economic reform period. A novel contribution of this article is the depiction of Australia's production isoquants to convey how combining labour and capital to produce real Gross Domestic Product (GDP) has changed over recent decades.     

Recent trends and structural breaks in the US and EU15 labour productivity growth

This article examines shifts in labour productivity growth in the US and in Europe between 1970 and 2007 based on econometric tests of structural breaks. Additionally, it makes use of time-series-based projections of labour productivity growth up to 2009 in order to detect breaks depending on confidence intervals of the projections. The identification of structural breaks in the US labour productivity growth is far from obvious. A statistically significant break is found in the late 1990s only if at least the 97.5th percentile of forecasts materializes in the future, which means that despite a clear pick up in productivity growth in the second half of the 1990s, the size of the hump is not large enough compared with past variations to make this change a statistically significant break. However, a significant break point is detected in the mid-1990s for the difference in labour productivity growth between the US and the EU15, even when controlling for the convergence of Europe towards the US productivity levels that has contributed to higher European performance in the early catch up phase. Finally, within Europe, the accumulation of Information and Communication Technology (ICT) capital seems to be related to differences in the shifts in structural labour productivity growth across countries.     

Unemployment dynamics with international capital mobility

We study the response of domestic unemployment rates to shocks in total factor productivity for economies with high capital mobility and low labour mobility. We show that high capital mobility amplifies the impact on the domestic unemployment rate of domestic fluctuations in total factor productivity, shortens the lag of the response to shocks and raises the variability of unemployment. But average unemployment is unaffected. Capital flows increase the riskiness of labour income and reduce the riskiness of capital income but do not reduce mean welfare.     

A comparison of specialisation gains from trade in in final and intermediate goods

This paper sets out a method for measuring and comparing the specialisation gains from trade in intermediate goods and final goods, based upon a vertically integrated sectors (VIS) modelling approach. The factor input requirements of domestic production to replace imported intermediates is compared with the factor requirements of the ‘compensating’ exports required to purchase the imports. This method is applied to the UK economy, using a 28 sector model and a breakdown of factor inputs into land, labour and capital. Estimates of net factor-usage or saving on individual factor (weighted for factor quality differences) and multi-factor bases are reported. The results indicate that trade in inputs and outputs was net labour-using, and net-capital and land-saving in 1979. The overall, or multi-factor, gain from trade in intermediates was greater than for trade in final goods in 1979, with overall resource savings of 3·01% and 1·73% respectively.     

Comprehensive income taxation, investments in human and physical capital, and productivity

This paper analyses the implications of the comprehensive income tax for the accumulation of human and physical capital and for the overall productivity level of the economy. A comprehensive income tax, applying to both labour income and capital income, is shown to discriminate against investments in human capital relative to investments in physical capital. It has an adverse impact on human capital accumulation and lowers productivity.     

Technology spillover effects within Spanish communities

The article uses panel data for the period 1990–2010 to estimate technology spillover effects on 17 Spanish communities. Accounting for nonstationarity and cointegration, we use the dynamic OLS estimator to estimate the impact of domestic and non-domestic R&;D capital stock on labour productivity of Spanish communities, taking into account trade-, migration- and foreign direct investment (FDI)-related technology diffusion channels. We find significant trade-related spillover effects within Spanish communities and from EU countries. On average, an increase in the non-domestic R&;D stock of 1% increases their labour productivity between 0.02% and 0.12% if related to bilateral trade pattern. Moreover, migration within Spanish communities has a negative impact ranging between ?0.07% and ?0.16% on labour productivity as the impact of inward migration is dominated by outward migration. There is no robust impact from FDI inflows of OECD countries in general or EU countries in particular. Finally, the domestic R&;D stock, physical capital and human capital are shown to be significant drivers for labour productivity in Spain no matter if non-domestic (local or foreign) spillover effects are trade-, migration- or FDI-related.     

An Empirical Analysis of Australian Labour Productivity

This study presents a model capturing sources of Australian aggregate labour productivity using annual time series data from 1970 to 2001. Labour productivity, or real output per hour worked, in this model is determined by real net capital stock in information technology and telecommunications (ITT), real net capital stock in the non-ITT sector, trade openness, human capital, the wage rate, international competitiveness, and the union membership rate. Given the lack of long and consistent time series data, multivariate cointegration techniques are inappropriate as the cointegration results will be sensitive to the lag length, the inclusion or exclusion of the intercept term or a trend in the cointegration equation and/or the vector autoregression (VAR) specification. Therefore, the Engle-Granger representation theorem and the Hausman weak exogeneity test have been employed to determine the short and long-term drivers of Australian productivity. Empirical estimates indicate that, in the long-term, policies aimed at promoting various types of investment, trade openness, international competitiveness, and the use of wage as a stimulant in a decentralised wage negotiation system, will improve labour productivity. In the short term, all the above variables except for human capital and labour reforms, which both need more time to evolve, determine productivity performance.     

Foreign ownership wage premia in emerging economies

In this article we examine the relationship between wages, labour productivity and ownership using a linked employer–employee dataset covering a large fraction of the Czech labour market in 2006. We distinguish between different origins of ownership and study wage and productivity differences. The raw wage differential between foreign and domestically‐owned firms is about 23 percent. The empirical analysis is carried out on both firm‐ and individual‐level data. A key finding is that industry, region and notably human capital explain only a small part of the foreign–domestic ownership wage differential. Both white and blue collar workers as well as skilled and unskilled employees obtain a foreign ownership wage premium. Foreign ownership premia are more prevalent in older and less technologically advanced firms. Joint estimation of productivity and wage equations show that, controlling for human capital, the difference in productivity is about twice as large as the wage differential. Overall, results indicate that the international firms share their rents with their employees.     

POPULATION AGEING,CAPITAL INTENSITY AND LABOUR PRODUCTIVITY

This paper analyses the implications of population ageing for the capital intensity of output and, therefore, labour productivity. Population ageing leads to sectoral shifts in demand for goods and services. If such shifts occur between goods that differ in their capital intensity, there will be a change in the average capital intensity of the economy and, therefore, in average labour productivity. In order to gauge the magnitudes of such effects, the present paper reports simulations of a calibrated model with two final goods and two intermediate goods, using data for two Pacific Rim countries for comparison: the United States and Australia. The data for these countries suggest that population ageing will, on average, shift expenditure towards goods with a relatively high capital intensity. The magnitude of the increase in labour productivity according to the simulations is likely to be small, but perhaps not trivial: in the order of 1–4% per annum by 2050. This might partially offset the negative effect of ageing on living standards.     

Human capital effects on labour productivity in EU regions

Recent years have seen a wealth of articles on spatial effects in empirical growth specifications. Endogenous growth models, together with the arguments of the new economic geography, have led to spatial dependence being identified with the existence of externalities which cross regional borders. This article continues in this line of research and offers new empirical evidence on the contribution of human capital and agglomeration economies to the differences in productivity in European Union regions. The article uses the spatial Durbin model with different weight matrices to explain the relation between human capital variables and labour productivity, with the advantage that it allows the effects of spatial externalities associated to human capital and agglomeration economies to be quantified.     

Are the FDI inflow spillover effects on Malaysia's economic growth input driven?

This paper inspects the influence of human capital, labour force, and absorptive capacity, physical capital as a control variable, foreign direct investment (FDI) inflows and gross domestic product (GDP) on Malaysia's productivity growth. A time series quarterly data from the period of 1999 to 2008 was used. The effects of FDI inflows on human capital, labour force, absorptive capacity and physical capital were investigated. The Ordinary Least Squares (OLS) regression was applied to estimate the data in the first step and in the second step productivity indicators were calculated. The results show that the FDI inflows and inputs used are negatively contributed to total factor productivity (TFP). Meanwhile, FDI plays a significant role in achieving economic growth through input driven as indicated by the contribution of the TFP. In this regard, a significant positive relationship between human capital, labour force and absorptive capacity which determines the spillover effect on Malaysian economic growth (GDP) was found and the physical capital has shown negative relationship.     

Conflict, Effort and Capital Stock in UK Wage Determination

The paper is concerned with the determination of wages, unemployment and labour productivity in the UK. The theoretical model suggests that in addition to economic factors, historical and ideological elements play an important role in the determination of wages, unemployment and productivity. Particular emphasis is put on the capital shortage hypothesis. It is argued that capital scrapping in response to the two oil price shocks, combined with subsequent sluggish growth in capital, may be responsible for the rise of the NAIRU and the persistence of unemployment. The empirical analysis is concerned with testing the theoretical model, using quarterly data for the UK from 1966 until 1994. We use cointegration analysis for the determination of wages, unemployment and labour productivity. This revised version was published online in July 2006 with corrections to the Cover Date.     

Age dependency and labour productivity divergence

This study finds strong empirical evidence in favour of the hypothesis that the age composition of population matters for labour productivity growth. We applied the fixed effects panel model using data on a large number of countries over the period 1980–2010. Our results suggest that higher age dependency not only directly impacts negatively on labour productivity but also modifies the impact of other determinants of labour productivity. Child dependency has a more adverse effect on labour productivity than old age dependency. We specifically find that the marginal effects of gross capital formation, information and communication improvement, and labour market reforms are significant at lower levels of age dependency. However, the marginal effect of savings on labour productivity is high at a high level of age dependency. The impact of age dependency varies between developed and developing economies. Diversity in the size and nature of age dependency across regions and different income groups help to explain the labour productivity differential across them.