nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2006‒02‒19
thirteen papers chosen by
Fabio Sabatini
Universita degli Studi di Roma, La Sapienza

  1. Employees Who Become Self-Employed: Do Labour Income and Wages Have an Impact? By Pernilla Andersson; Eskil Wadensjö
  3. Growth in Euro Area Labour Quality By Schwerdt, Guido; Turunen, Jarkko
  4. The Bologna Process: How student mobility affects multi-cultural skills and educational quality By Lydia Mechtenberg; Roland Strausz
  5. Higher Education: Does Public Expenditure Increase Enrollment? By Bergh, Andreas; Fink, Günther
  6. Are Specific Skills an Obstacle to Labour Market Adjustment? Theory and an Application to the EU Enlargement By Lamo, Ana; Messina, Julian; Wasmer, Etienne
  7. Performance related pay and labor productivity By Gielen,Anne C.; Kerkhofs,Marcel J.M.; Ours,Jan C. van
  8. Children reading fiction books because they want to By Ours,Jan C. van
  10. Structural Modelling of Female Labour Participation and Occupation Decisions By Rafael E. De Hoyos
  12. Trade and the Great Divergence: The Family Connection By Galor, Oded; Mountford, Andrew
  13. Social Capital, Public Spending and the Quality of Economic Development: The Case of Italy By Fabio Sabatini

  1. By: Pernilla Andersson (SOFI, Stockholm University); Eskil Wadensjö (SOFI, Stockholm University and IZA Bonn)
    Abstract: This paper analyzes the self-employment decision among Swedish-born male employees. The main objective of the paper is to investigate the impact of the relation between the actual and the predicted income on the probability to become self-employed. The predicted income is calculated from a standard income regression with controls for age, education, family status, family background and place of residence. By construction of a ratio between the actual and the predicted income we identify three groups of employees: (1) employees who have an actual income lower than the predicted income (underpaid), (2) employees with an actual income close to the predicted one, and (3) employees with an actual income higher than the predicted one (overpaid). The first question is if individuals who are "overpaid" or "underpaid" are more likely to become self-employed than those who are paid as we can expect. Our main finding is that employees who receive an income that differs from the one predicted by the income regression are more likely to become self-employed. We also analyse the effect of the ratio on four different measures of success as self-employed: income from self-employment, number of employees, turnover of the firm, and the probability to have a firm registered as a limited liability company. The general conclusion is that those who performed well as employees are also more successful as self-employed.
    Keywords: self-employment, occupational choice, occupational mobility, labour income, wages
    JEL: J23 J24 J30 J62
    Date: 2006–02
  2. By: Christophe Muller (Universidad de Alicante); Christophe Nordman (DIAL, París)
    Abstract: In this paper, we study the return to human capital variables for wages of workers observed in Tunisian matched worker-firm data in 1999. We develop a new method based on multivariate analysis of firm characteristics, which allows us most of the benefits obtained by introducing firm dummies in wage equations. It also provides a human capital interpretation of the effect of these dummy variables. Moreover, in the studied data, using three firm characteristics easily collectable yields results close to those obtained by using the matched structure of the data.
    Keywords: wage, returns to human capital, matched worker-firm data, quantile regressions, factor analysis, Tunisia
    JEL: J24 J31 O12
    Date: 2004–07
  3. By: Schwerdt, Guido; Turunen, Jarkko
    Abstract: Composition of the euro area workforce evolves over time and in response to changing labour market conditions. We construct an estimate of growth in euro area labour quality over the period 1983-2004 and show that labour quality has grown on average by 0.6% year-on-year over this time period. Labour quality growth was significantly higher in the early 1990s than in the 1980s. This strong increase was driven by an increase in the share of those with tertiary education and workers in prime age. Growth in labour quality moderated again towards the end of the 1990s, possibly reflecting the impact of robust employment growth resulting in the entry of workers with lower human capital. Labour quality growth has on average accounted for nearly one third of euro area labour productivity growth. The results point to a significant decline in the contribution of total factor productivity to euro area growth.
    Keywords: growth accounting; human capital; labour quality; total factor productivity
    JEL: E24 J24 O47
    Date: 2006–02
  4. By: Lydia Mechtenberg (Technical University of Berlin); Roland Strausz (Free University of Berlin, Department of Economics)
    Abstract: We analyze the two goals behind the European Bologna Process of increasing student mobility: enabling graduates to develop multi--cultural skills and increasing the quality of universities. We isolate three effects: 1) a competition effect that raises quality; 2) a free rider effect that lowers quality; 3) a composition effect that influences the relative strengths of the two previous effects. The effects lead to a trade--off between the two goals. Full mobility may be optimal, only when externalities are high. In this case, student mobility yields inefficiently high educational quality. For more moderate externalities partial mobility is optimal and yields an inefficiently low quality of education.
    Keywords: Student mobility, Quality of higher education, Multi--cultural skills, Bologna Process
  5. By: Bergh, Andreas (The Ratio Institute); Fink, Günther (Bocconi University)
    Abstract: This paper evaluates the effects of public education expenditure on student enrollment in tertiary education. We use a cross-section of 132 countries to demonstrate that public expenditure on primary and secondary education positively affects tertiary enrollment rates, while the generosity of tertiary education subsidies themselves do not appear to have any signifcant impact on tertiary enrollment. The results presented are robust to various specifcations, and raise serious concerns regarding the within country allocation of public resources on education, which seems to be biased towards higher education, especially for less developed countries.
    Keywords: Higher (Tertiary) Education; Enrollment
    JEL: H52 I22
    Date: 2006–02–15
  6. By: Lamo, Ana; Messina, Julian; Wasmer, Etienne
    Abstract: Countries react differently to large labour reallocation shocks. Some minimize the costs by adapting rapidly, while others suffer long periods of costly adjustment, typically high and persistent unemployment and temporary output losses. We argue that the existence of large amounts of specific human capital slows down the transitions and makes them costly. We illustrate this point by building a theoretical framework in which young agents' careers are heavily determined by the type of initial education, and analyze the transition to a new steady-state after a sectoral demand shift. In the absence of mobility, it can take as much as a generation for the economy to absorb the shock. An interesting case study is the European Union enlargement, which led to a modernization of many sectors in Eastern countries and to a fast decline of traditional industries and agriculture. Using labour force data from a large economy with rigid labour markets, Poland, and a small open economy with increased flexibility, Estonia, we document our main claim, namely that specialized education reduces workers' mobility and hence their ability to cope with economic changes. We find that holding a vocational degree is associated with much longer unemployment duration spells, relatively large wage penalties when changing jobs and higher likelihood of leaving activity for elder workers. Quantitative exercises suggest that the over-specialization of the labour force in Poland led to much higher and persistent unemployment compared to Estonia during the period of EU enlargement. Traditional labour market institutions (wage rigidity and employment protection) increased, but to a much lesser extent, the unemployment gap.
    Keywords: enlargement; labour reallocation; matching; specific skills; unemployment; vocational education
    JEL: J30
    Date: 2006–02
  7. By: Gielen,Anne C.; Kerkhofs,Marcel J.M.; Ours,Jan C. van (Tilburg University, Center for Economic Research)
    Abstract: This paper uses information from a panel of Dutch firms to investigate the labor productivity effects of performance related pay (PRP). We find that PRP increases labor productivity at the firm level with about 9%.
    Keywords: performance related pay; labour productivity
    JEL: C41 H55 J64 J65
    Date: 2006
  8. By: Ours,Jan C. van (Tilburg University, Center for Economic Research)
    Abstract: This paper investigates the reading of fiction books by 15-year-olds in 18 OECD countries. It appears that girls fiction books more often than boys, whereas boys read comic books more often than girls. The intensity by which children read fiction books is influenced by parental education, family structure, and the number of books and tv's at home. Reading comic books does not affect the reading of fiction books. Parents who want their children to read fiction books frequently should have a lot of books at home and at most one television.
    Keywords: reading;PISA-data; books
    JEL: L82 Z11
    Date: 2006
  9. By: Amparo Castelló-Climent (Universidad Carlos III de Madrid)
    Abstract: This paper studies the empirical relationship between inequality and economic growth. It estimates a dynamic panel data model that controls for fixed effects and, therefore, solves the problem of omitted variable bias present in cross-section regressions. Forbes?(2000) results suggest that income inequality and economic growth are positively related when country specific effects are taken into account. This paper shows that this result holds even controlling for education inequality. However, neither the first difference nor the system GMM estimator, which seems to perform better in growth regressions, support a positive association between education inequality and economic growth. On the contrary, an increase in human capital inequality is related to lower subsequent growth rates not only in the long-term across-countries but also in the short-term within a country. In particular, the negative relationship between human capital inequality and growth is mainly due to a discouraging effect on the physical capital investment rates and, in line with the model of De la Croix and Doepke (2003), through a channel that connects inequality an fertility decisions.
    Keywords: Human capital and income inequality; Economic growth; Dynamic panel data model.
    JEL: O15
    Date: 2004–07
  10. By: Rafael E. De Hoyos
    Abstract: The objective of this paper is to estimate the parameters defining female labour participation and occupation decisions. Departing from a theoretical framework, we use micro data to estimate the wage-participation elasticity in Mexico. Consistency between the selectivity-adjusted wages and the multinomial participation equations is achieved via a two-step estimation procedure following Lee (1984). We use the results of our model to test and quantify three hypotheses explaining recent increases in female labour participation in Mexico. Our results show that the observed 12 per cent increase in female labour participation in Mexico between 1994 and 2000 is explained by the combination of a negative income shock caused by the 1994-95 Peso crisis, the increase in expected wages taking place in the manufacturing sector during the post-NAFTA period and a reduction in the female reservation wage.
    Keywords: Participation, wage differentials, microsimulation, Mexico
    JEL: C34 J23 J24 J31
    Date: 2006–02
  11. By: Iñigo Iturbe Ormaetxe (Universidad de Alicante); Guadalupe Valera (Universidad Pablo de Olavide)
    Abstract: The provision of pensions for the old and public education for the young represent a large share of public budgets. In most Western countries, current Social Security systems are under a big financial stress. Several reforms have been proposed to solve this problem. This paper deals with the impact that some of these reforms have, through a political process, on publicly financed education. We develop a model linking both public transfer schemes, in which heterogeneous individuals vote the educational tax. Our findings show that most of the proposals that entail a partial privatization of the pension system have a negative impact on public education and, thus, on economic growth.
    Keywords: Social Security Reform, Human Capital, Public Education, Voting.
    JEL: D72 H55 I22 J24
    Date: 2004–05
  12. By: Galor, Oded; Mountford, Andrew
    Abstract: This research argues that the rapid expansion of international trade in the second phase of the industrial revolution has played a major role in the timing of demographic transitions across countries and has thereby been a significant determinant of the distribution of world population and a prime cause of the 'Great Divergence' in income per capita across countries in the last two centuries. The analysis suggests that international trade had an asymmetrical effect on the evolution of industrial and non-industrial economies. While in the industrial nations the gains from trade were directed primarily towards investment in education and growth in output per capita, a significant portion of the gains from trade in non-industrial nations was channelled towards population growth.
    Keywords: demographic transition; growth; human capital; industrial revolution; international trade
    JEL: F11 F43 J10 N30 O40
    Date: 2006–02
  13. By: Fabio Sabatini (University of Rome La Sapienza)
    Abstract: This paper carries out an empirical assessment of the relationship between social capital and the quality of economic development in Italy. The analysis draws on a dataset collected by the author including about two hundred variables representing different aspects of economic development and four “structural” dimensions of social capital. The quality of development is measured through human development and indicators of the state of health of urban ecosystems, public services, gender equality, and labour markets, while social capital is measured through synthetic indicators representing strong family ties, weak informal ties, voluntary organizations, and political participation. The quality of development exhibits a strong positive correlation with bridging weak ties and a negative correlation with strong family ties. Particularly, the analysis shows a strong correlation between informal ties and an indicator of “social well-being” (synthesizing gender equality, public services and labour markets) and between voluntary organizations and the state of health of urban ecosystems. Active political participation proves to be irrelevant in terms of development and well-being. Finally, the role of public spending for education, health care, welfare work, and the environment protection is analysed, revealing a scarce correlation both with social capital and development indicators.
    Keywords: Social capital, Social networks, Public spending, Economic development, Human development, Principal component analysis
    JEL: O15 O18 R11 Z13
    Date: 2006–01

This nep-hrm issue is ©2006 by Fabio Sabatini. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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