Knowledge Spillovers,ICT and Productivity Growth

This paper looks at the channels through which intangible assets affect productivity growth. The econometric analysis exploits a new data set on intangible investment (INTAN‐Invest) in conjunction with EUKLEMS productivity estimates for 10 EU member states from 1998 to 2007. We find that (a) the output elasticity of intangible capital depends upon ICT intensity, consistent with complementarities between ICT and intangible capital; (b) non‐R&D intangible capital has a higher estimated output elasticity than its factor share, as does (c) an index of labour composition. The last two findings are consistent with growth spillovers from investments in knowledge‐based/intangible capital and skills.     

Productivity, convergence and policy: a study of OECD countries and industries

This paper analyses trends in labour productivity and its underlying determinants in a panel of OECD countries from 1979 to 2002. Data Envelopment Analysis (DEA) is used to estimate a Malmquist measure of multifactor productivity (MFP) change. We decompose the growth in labour productivity into (i) net technological change (ii) input biased technical change (IBTC) (iii) efficiency change and (iv) capital accumulation. We analyse the effect of each of these factors in the transition towards the equilibrium growth paths of both labour productivity and per capita GDP for the OECD countries, controlling for the effects of different policies and institutions. The results indicate that on average gaps in productivity or income levels are narrowing down although there is no evidence to suggest that the entire OECD area comprises a single convergence “club”. Using kernel estimation methods we find that that labour productivity and per capita GDP are settling toward a twin peak (bimodal) distribution. Panel unit root tests over an extended (1960–2001) period provide general support for the convergence hypothesis. Analysis of the contributions of productivity growth within industries and sectoral composition changes show that aggregate productivity change is predominantly driven by ‘net’ within sector effects with very little contribution emerging from sectoral shifts (the ‘in-between’ static or dynamic effects resulting from higher or above average productivity industries gaining employment shares or low productivity industries losing shares).     

Productivity and Growth in UK Industries: An Intangible Investment Approach*

This article calculates some facts for the ‘knowledge economy’. Using new data, first we document UK intangible investment and find that (i) this is greater than tangible investment by £37bn in 2008; (ii) R&D is 11% of total intangible investment, software 15%, and training and organizational capital 22% each; (iii) the most intangible‐intensive industries are manufacturing and financial services. Next, we measure the contribution of intangible capital to growth for 2000–08. We find that intangible capital accounts for 23% of labour productivity growth and treating intangibles as investment lowers total factor productivity growth in the 2000s by 24% (R&D lowers it by 3%).     

Tenure and output

A key tenet of the theory of human capital is that investment in skills results in higher productivity. The previous literature has estimated the degree of investment in human capital for individuals by looking at individual wage growth as a proxy for productivity growth. In this paper, we have both wage and personal productivity data, and thus are able to measure of the increase in workers' output with tenure as evidence of the degree of learning on the job. The data is from an autoglass company. Most of production occurs at the individual level so measures of output are clear. We find a very steep learning curve in the first eight months on the job: output is 53 percent higher after eight months than it is initially. Our data show that these output gains with tenure are not reflected in equal percentage pay gains: pay profiles are much flatter than output profiles in the first year and a half on the job. For these data, using wage profiles significantly underestimates the amount of investment compared to the gains evident in output-tenure profiles. The pattern of productivity rising more rapidly than pay reverses after two years of tenure, although our evidence on this point is less reliable. Worker selection is also important. Workers who stay longer have higher output levels and faster early learning.     

Intangible investment in people and productivity

Organizational activity, information and communication technology work, and research and development (R&D) can be classified as work that creates intangible capital. We measure the returns to these three types of labor input by accounting for differences in their productivity compared with other labor inputs using Finnish firm-level data from 1998 to 2008. We apply a novel idea to use hiring as one proxy for productivity and demand shocks. We find that organizational workers increase total factor productivity and improve the profitability of high-productivity firms. R&D workers account for a large share of intangible capital; however, the returns to R&D are low. Investments in organizational competence are more likely to result in more rapid productivity growth. Firms with performance-related pay or domestically owned firms with extensive foreign activities have been among the highest performers with respect to the use of organizational work.     

Workforce churning,human capital disruption,and organisational performance in different technological contexts

We assess the influence of workforce churning on the relationship between organisational human capital and labour productivity. Building on collective turnover research and human capital theory, we examine how the components of workforce churning (i.e., voluntary turnover, involuntary turnover, and new hires) influence the relationship between existing human capital and labour productivity. Further, we examine how this influence varies according to a firm's technological intensity. Our data come from 1,911 Italian manufacturing firms and reveals that collective voluntary turnover negatively affects the relationship between organisational human capital and labour productivity regardless of an organisation's level of technological intensity. In contrast, collective involuntary turnover enhances the relationship between human capital and labour productivity, and its effect is even stronger for organisations with more technologically intensive operations. Finally, our results suggest that the integration of new hires disrupts the relationship between human capital and productivity, particularly for firms with technologically intensive operations.     

RETURN TO EXPERIENCE AND INITIAL WAGE LEVEL: DO LOW WAGE WORKERS CATCH UP?

This paper estimates the relationship between initial wage and return to experience. We use a Mincer‐like wage model to non‐parametrically estimate this relationship allowing for an unobservable individual permanent effect in wages and unobservable individual return to experience. The relationship between return to experience and unobservable individual ability is negative when conditioning on educational attainment, while the relationship between return to experience and educational attainment is positive. We link our findings to three main theories of wage growth, namely search, unobserved productivity and learning, and human capital. We devise several empirical tests in order to separate the theories. We find evidence in favor of the unobserved productivity and learning model and mixed evidence regarding the search model. We find no evidence in support of the human capital model. Copyright © 2013 John Wiley & Sons, Ltd.     

Technology catching-up and regulation in European regions

This paper analyses the effects of the intensity of regulations in the product and labour markets on the growth of total factor productivity (TFP) for 121 European regions. A technological catch-up model is estimated for the period 1995–2007. We use the spatial lag of X (SLX) model to capture possible spatial interactions across spatial units. Our empirical findings show that lower levels of regulation are associated with higher TFP growth. Lower barriers to entrepreneurship and lower bureaucratic costs have a positive effect on productivity growth. Corruption raises operational costs, distorts the allocation of resources and negatively affects innovation activities, thereby reducing TFP growth. Further liberalization in the labour market (in terms of hiring and firing regulation, working hours regulation and employment protection legislation) has a significant positive effect on the growth of TFP. In addition, both regional technological and regional human capital have a positive impact on the TFP growth in European regional economies.     

Analysis of regional productivity with capital as a quasi-fixed factor

Most existing studies of regional productivity growth do not incorporate the effect of variations in capacity utilization on changes in output. By failing to do so, their factor productivity estimates are biased. To overcome this shortcoming, we adjust multifactor productivity growth measure for changes in capacity utilization. Our technique recognizes that capital is a quasi-fixed factor which implies that capital in the short run can be either under- or over-utilized by a firm. Our results from 1974 to 1978 show that capacity adjusted multifactor productivity growth measure exceeds capacity unadjusted multifactor productivity growth measure for the nine census divisions. The bias in the capacity unadjusted measure of multifactor productivity growth is approximately 8 percent in East North Central and over 33 percent in Mountain. We find that the aggregate factor productivity growth is slowest in the traditional manufacturing belt (Middle Atlantic and East North Central divisions). The level of aggregate factor productivity in the manufacturing belt, however, is almost 33 percent higher than in regions in the south.     

Local Economic Structure and Growth

Abstract

This paper tests how the local economic structure—measured by local sector specialization, competition and diversity—affects growth of manufacturing sectors. Most of the empirical literature assumes that in the long run more productive regions will attract more workers and use employment growth as a measure of local productivity growth. However, this approach is based on strong assumptions, such as those of national labour markets and homogeneous labour. This paper shows that if we relax these assumptions, regional adjusted wage growth is a better measure of productivity growth than employment growth. This measure is used in order to study regional growth in Portuguese regions between 1985 and 1994. Evidence is found of MAR externalities in some sectors and no evidence of Jacobs or Porter externalities in most of the sectors. These results are at odds with the findings for employment-based regressions, which show that regional concentration and the region's size have a negative effect in most of the sectors. It is also shown that simply using regional wage growth would overstate the effect of regional concentration and competition on long-run growth.     

SKILLS MISMATCH: CONCEPTS,MEASUREMENT AND POLICY APPROACHES

The term skills mismatch is very broad and can relate to many forms of labour market friction, including vertical mismatch, skill gaps, skill shortages, field of study (horizontal) mismatch and skill obsolescence. In this paper, we provide a clear overview of each concept and discuss the measurement and inter‐relatedness of different forms of mismatch. We present a comprehensive analysis of the current position of the literature on skills mismatch and highlight areas which are relatively underdeveloped and may warrant further research. Using data from the European Skills and Jobs Survey, we assess the incidence of various combinations of skills mismatch across the EU. Finally, we review the European Commission's country‐specific recommendations and find that skills mismatch, when referring to underutilized human capital in the form of overeducation and skills underutilization, receives little policy attention. In cases where skills mismatch forms part of policy recommendations, the policy advice is either vague or addresses the areas of mismatch for which there is the least available evidence.     

Evaluating the impacts of human capital stocks and accumulation on economic growth: some new evidence

"Various hypotheses have been put forward in recent years concerning the contribution of human capital to economic growth. This paper argues that school enrolment rates--by far the most commonly used human capital measure in growth regressions attempting to test these hypotheses--conflate human capital stock and accumulation effects and lead to misinterpretations of the role of labour force growth. An alternative education-related human capital measure is constructed which is capable of distinguishing between stocks and flows. Applying this measure to samples of developed and less developed countries during the 1960-85 period suggests not only that there are important growth effects associated both with 'initial' stocks of, and subsequent growth in, human capital, but also that this new measure out-performs the simple school enrolment rates used in previous analyses."     

The disabling effects of enabling social policies on organisations’ human capital development practices for women

Paid parental leave and externally provided childcare are social policies designed to enhance parents' labour force participation. These policies influence not only men's and women's decisions regarding their labour market activity but also organisational decision makers' (ODMs) expectations about their employees' availability to work and thus, their willingness to invest in their employees' human capital. Using a sample of over 13,000 individuals from 19 countries, we investigate the interaction between gender and social policies on human capital development practices. In line with statistical discrimination theory, which suggests that ODMs hold different expectations about female and male productivity, we find that paid parental leave and externally provided childcare are negatively associated with the provision of human capital development for women but not for men.     

European integration,productivity growth and real convergence: Evidence from the new member states

We estimate the determinants of labor productivity growth in 8 new European Union (EU) member states that joined the Union in 2004. Our focus is on the impact of globalization and EU integration efforts on labor productivity growth. Previous studies test the impact of trade using either exports or trade openness. We also test the impact of imports separately on labor productivity growth. Using panel data for 1995–2006 period, we find that globalization has mixed effects. FDI and exports improve productivity, but imports hurt it. Regarding domestic variables, we find that human capital is the most important source of labor productivity growth in the new member states. There is also considerable adjustment of labor productivity towards EU15 levels, indicating significant “catching up” and hence real convergence. Policy implications of the findings are also discussed.     

Productivity Growth,Human Capital and Technology Spillovers: Nonparametric Evidence for EU Regions

This paper assesses the strength of productivity spillovers nonparametrically in a data set of 12 industries and 231 NUTS2 regions in 17 European Union member countries between 1992 and 2006. It devotes particular attention to measuring the catching up through spillovers depending on the technology gap of a unit to the industry leader and the local human capital endowment. We find evidence of a nonlinear relationship between the technology gap to the leader as well as human capital and growth in logs. Spillovers are smallest for units with a medium‐high technology gap to the leader, especially for regions where human capital endowments are low.     

Productivity,Infrastructure and Human Capital in the Spanish Regions

We revisit the cointegration relation among output, physical capital, human capital, public capital and labour for 17 Spanish regions observed over the period 1964–2011. Our approach is based on the estimation of a panel data model where cross-section dependence is allowed among the members of the panel. The paper emphasizes the idea that common factors capturing, for instance, total factor productivity, should be accounted for when estimating the parameters. We use several proposals to estimate the long-run relation among these variables, which render consistent and efficient estimates of the parameters.     

ORGANIZATIONAL CHANGE,SKILL FORMATION,HUMAN CAPITAL MEASUREMENT: EVIDENCE FROM ITALIAN MANUFACTURING FIRMS

Abstract This paper emphasizes the role of labour demand as a determinant of human capital formation. After a section in which the alternative conceptions on the functioning of labour markets are presented and different ways of measuring human capital are compared, an applied analysis is carried out in which we provide a labour‐demand‐oriented measure of human capital, as defined by the amount of specific skills firms generate through work‐based training (WBT) activities. By merging three rich firm‐level datasets, we estimate the impact of a set of variables supposed to affect both the propensity to invest in WBT and the intensity of training within the Italian manufacturing industry over the period 2001–2005. Special attention is devoted to the variables characterizing within‐firm organization of knowledge, organizational change and the formation of competence pipelines: among them, innovation, internationalization commitment, out‐sourcing and new hirings. The estimates show that the effect of innovation on WBT is higher when the introduction of new technologies is supported by organizational innovations. When looking at the nature of WBT, we investigate the different determinants of the firms' propensity to provide both in‐house and outside training. We measure training intensity in terms, respectively, of the number of provided training activities, private and total training costs and share of trainees.     

The World Technology Frontier: What Can We Learn from the US States?*

We re‐estimate the world technology frontier non‐parametrically using a dataset covering OECD country‐level data and US state‐level data on GDP per worker and the stocks of physical capital, unskilled labour and skilled labour. The auxiliary use of US state‐level data significantly reduces the upward bias in cross‐country estimates of technical efficiency, and so does allowing for imperfect substitutability between skilled and unskilled labour. We then use our adjusted estimate of the world technology frontier in a series of decompositions of productivity differences and sources of economic growth in the OECD in 1970–2000, including also ‘appropriate technology vs. efficiency’ decompositions.     

The effect of trade on productivity growth and the demand for skilled workers in Canada

We use an input–output model to examine the effect of trade integration on productivity growth and the demand for skilled workers in Canada for the period 1981–1997. We find that trade integration has a positive effect on both labour productivity and total factor productivity. Labour productivity and total factor productivity grew faster in export and import industries than in the total business sector over this period, and this productivity growth gap has widened over time. Canada is found to have a comparative advantage in capital- and natural-resource-intensive industries, although it has declined over time. We find that trade integration has little effect on the demand for skilled and unskilled workers in Canada.