nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2007‒11‒10
eighteen papers chosen by
Fabio Sabatini
University of Rome, La Sapienza

  1. Foreign Direct Investment and Country-Specific Human Capital By Jinyoung Kim; Jungsoo Park
  2. Human capital externalities and adult mortality in the U.S. By Christopher H. Wheeler
  3. Higher Education Reform and the Renewed Lisbon Strategy: Role of Member States and the European Commission By Frederick van der Ploeg; Reinhilde Veugelers
  5. "For One More Year with You": Changes in Compulsory Schooling, Education and the Distribution of Wages in Europe By Giorgio Brunello; Margherita Fort; Guglielmo Weber
  6. Catching-up and Falling-behind in Economic Development: A Human Capital Approach By Jinyoung Kim
  7. Africa’s Education Enigma? The Nigerian Story By Ruth Uwaifo Oyelere
  8. The Benefits and Costs of Alternative Strategies to Improve Educational Outcomes By Orazem, Peter; Glewwe, Paul; Patrinos, Harry
  9. Educational Mismatches, Wages and Economic Growth: A Causal Analysis for the French Case since 1980 By Jean-Pascal Guironnet; Magali Jaoul-Grammare
  10. Determinants of Secondary School Choice in the Czech Republic By Lenka Drnakova
  11. School Tracking Across the Baltic Sea By Ariga, Kenn; Brunello, Giorgio; Iwahashi, Roki; Rocco, Lorenzo
  12. Disparities in Labor Market Outcomes across Geopolitical Regions in Nigeria: Fact or Fantasy? By Ruth Uwaifo Oyelere
  13. Do College-Bound High School Students Need an Extra Year? Evidence from Ontario’s ‘Double Cohort’ By Louis-Philippe Morin
  15. The Relation between Child Labour and Mothers’ Work: The Case of India By Francesca Francavilla; Gianna Claudia Giannelli
  16. Returns to Apprenticeship Training in Austria: Evidence from Failed Firms By Josef Fersterer; Jörn-Steffen Pischke; Rudolf Winter-Ebmer
  17. Market Characteristics, Intra-Firm Coordination, and the Choice of Human Resource Management Systems: Evidence from New Japanese Data By Takao Kato; Hideo Owan
  18. Return Migration, Investment in Children, and Intergenerational Mobility: Comparing Sons of Foreign and Native Born Fathers By Christian Dustmann

  1. By: Jinyoung Kim (Department of Economics, Korea University); Jungsoo Park (Department of Economics, Sogang University)
    Abstract: Workers who are educated abroad acquire human capital specific to the country of foreign study (for example, language capital and country-specific knowledge on firm organization and on social system) which makes them more productive than domestically educated workers when both types of workers are employed by subsidiaries of multinational firms headquartered in the country of foreign study. An increase in foreign-educated labor in an FDI-host country thus attracts more FDI from the country of foreign study. We find evidence from bilateral FDI and foreign-student data for 63 countries over the period of 1963-1998 that strongly supports this prediction. Our findings suggest that foreign-educated labor may account for a sizable portion of growth in FDI flows during the sample period.
    Keywords: foreign direct investment, multinational firm, human capital, foreign education, students abroad
    JEL: F21 F10
    Date: 2007
  2. By: Christopher H. Wheeler
    Abstract: Human capital is now widely recognized to confer numerous benefits, including higher incomes, lower incidence of unemployment, and better health, to those who invest in it. Yet, recent evidence suggests that it also produces larger, social (external) benefits, such as greater aggregate income and productivity as well as lower rates of crime and political corruption. This paper considers whether human capital also delivers external benefits via reduced mortality. That is, after conditioning on various individual-specific characteristics including income and education, do we observe lower rates of mortality in economies with higher average levels of education among the total population? Evidence from a sample of more than 200 U.S. metropolitan areas over the decade of the 1990s suggests that there are significant human capital externalities on health. After conditioning on a variety of city-specific characteristics, the findings suggest that a 5 percentage point decrease in the fraction of college graduates in the population corresponds to a 14 to 36 percent increase in the probability of death, on average. Although I am unable to identify the precise mechanism by which this relationship operates, it is certainly consistent with the idea that interactions with highly educated individuals - who tend to exhibit relatively healthy behaviors - encourage others to adopt similar behaviors. Evidence of a significant inverse relationship between aggregate human capital and smoking, conditional on personal characteristics, in a sample of 201 U.S. metropolitan areas is also consistent with this hypothesis.
    Date: 2007
  3. By: Frederick van der Ploeg; Reinhilde Veugelers
    Abstract: Discussions on problems in higher education in Europe typically focus on rising enrolment rates, access, governance, underperformance in research and teaching, lack of internationalisation, the lack of private and public funding. Our proposals for reform are based on more autonomy for universities, higher tuition fees, more private funding, introduction of income-contingent loans, better governance, more competition and internationalisation. Taking a subsidiarity perspective, the role of the EU in reforming the higher education sector in Europe is providing mutual policy learning opportunities on higher education reforms across Member States and supporting the building of higher education infrastructure in Member States (through the Structural and FP Funds). But beyond the support to Member States policies, the EU should further develop the European dimension, through furthering the goals of the Bologna reforms, cross recognition of qualifications, funding and promoting intra-EU mobility of students, researchers and teachers. The EU should take more initiatives to facilitate global mobility and cooperation. Finally, consistent with the subsidiarity principle, the EU can develop "flagships" initiatives.
    Keywords: higher education, enrolment, access, governance, research, teaching, funding, tuition fees, income-contingent loans, open market for the EU, Bologna reforms, mobility, competition, subsidiarity, flagships
    JEL: H2 H4 I2
    Date: 2007
  4. By: Isaac Ehrlich (State University of New York at Buffalo and NBER); Jinyoung Kim (Department of Economics, Korea University)
    Abstract: Using an endogenous-growth, overlapping-generations framework where human capital is the engine of growth, we derive propositions concerning the evolution of income and fertility distributions and their interdependencies over three phases of economic development. In our model, heterogeneous families determine fertility and children’s human capital, and generations are linked through intra-family and inter-family interactions. Through simulations and regression analyses we test key implications concerning the dynamic behavior of inequalities in fertility, educational attainments, and three income inequality measures -- family-income inequality, income-group inequality, and the Gini coefficient. In this context, we also reexamine the “Kuznets hypothesis?concerning the relation between income growth and inequality.
    Keywords: income inequality, human capital, fertility, schooling, family, endogenous growth
    JEL: D1 D3 J1 J2
    Date: 2007
  5. By: Giorgio Brunello (University of Padova, CESifo and IZA); Margherita Fort (European University Institute and University of Padova); Guglielmo Weber (University of Padova, CEPR and IFS)
    Abstract: Using data from 12 European countries and the variation across countries and over time in the changes of minimum school leaving age, we study the effects of the quantity of education on the distribution of earnings. We find that compulsory school reforms significantly affect educational attainment, especially among individuals belonging to the lowest quantile of the distribution of ability. Contrary to previous findings in the relevant literature, we find that additional education reduces wage inequality below median income and increases it above median income. There is also evidence in our data that education and ability are complements in the production of human capital and earnings. While these results support an elitist education policy - more education to the brightest, they also suggest that investing in the less fortunate but bright could payoff both on efficiency and on equity grounds.
    Keywords: education reforms, distribution of earnings, Europe
    JEL: J24
    Date: 2007–10
  6. By: Jinyoung Kim (Department of Economics, Korea University)
    Abstract: This paper proposes an endogenous growth model where human capital is the engine of growth and can be transferred across countries via costly foreign education. Importing advanced knowledge by students abroad can improve a developing country¡¯s chance of catching up with a developed host country. An excessively wide difference in knowledge level between the two countries, however, can hamper the chance of catching-up because few students can afford foreign education. Taking these two counteracting forces into account, our model predicts that the relationship between income growth in a developing country and income gap will assume the form of an inverted-U schedule. The model also produces an endogenous threshold level of income gap which separates catching-up and falling-behind. We test the model¡¯s propositions and estimate the threshold using international panel data, which lends support to our theory.
    Keywords: Catch-up, Convergence, Divergence, Human capital, Foreign education
    JEL: O40 I20
    Date: 2007
  7. By: Ruth Uwaifo Oyelere (Georgia Institute of Technology and IZA)
    Abstract: In the last two decades, the social and economic benefits of formal education in Sub-Saharan Africa have been debated. Anecdotal evidence points to low returns to education in Africa. Unfortunately, there is limited econometric evidence to support these claims at the micro level. In this study, I focus on Nigeria a country that holds 1/5 of Africa’s population. I use instruments based on the exogenous timing of the implementation and withdrawal of free primary education across regions in this country to consistently estimate the returns to education in the late 1990s. The results show the average returns to education are particularly low in the 90s, in contrast to conventional wisdom for developing countries (2.8% for every extra year of schooling between 1997 and 1999). Surprisingly, I find no significant differences between OLS and IV estimates of returns to education when necessary controls are included in the wage equation. The low returns to education results shed new light on both the changes in demand for education in Nigeria and the increased emigration rates from African countries that characterized the 90s.
    Keywords: human capital, instrumental variables, Nigeria, returns to education, schooling
    JEL: J24 I21 I29 O12
    Date: 2007–10
  8. By: Orazem, Peter; Glewwe, Paul; Patrinos, Harry
    Abstract: This paper reviews the stylized facts regarding the levels of human capital investments and the returns to those investments in developing countries. It shows that 23% of children in developing countries do not complete the fifth grade and of these, 55% started school but dropped out. We argue that eliminating dropouts is the most cost effective way to make progress on the goal of Universal Primary Education. Of the various mechanisms we can use, mechanisms that stimulate schooling demand have the strongest evidence of success to date and are the most cost effective.
    Keywords: Education, literacy, benefits, costs, developing countries, Universal Primary Education, collateral benefits
    JEL: O2
    Date: 2007–11–02
  9. By: Jean-Pascal Guironnet; Magali Jaoul-Grammare
    Abstract: In the last two decades, France has experienced an increase in mismatches between education and work. This article studies twenty two years of French productivity to highlight the causes and effects of overeducation on the employee wages and the national income. From the INSEE and Cereq data, this analysis shows a positive effect in the short term on wages of the least qualified and overeducated worker. Furthermore, overeducation phenomenon does not penalize the higher graduates. Paradoxically, if it is always profitable for individuals to increase their education investment; in term of growth, overeducation of the higher graduates produce an unfavourable short term effect on GDP.
    Date: 2007–04
  10. By: Lenka Drnakova
    Abstract: The admission process into secondary schools in the Czech Republic involves high risk of ending up at an undesired school if failing to be admitted to one’s preferred school. Hence, the application decision is an important element of the process since individuals have to assess their chances of being admitted. Empirical evidence based on pupils participating in the PISA project suggests that especially the education of parents and cognitive abilities matter to a large extent for a pupil’s application decision. Noncognitive skills are found to have an impact on a pupil’s decision as well, even though the significance and magnitude differ across districts, and, most importantly, genders. Non-cognitive skills of females operate in accordance with intuitive expectations– higher risk associated with the outcome of the admission process in the district increases the importance of non-cognitive abilities with respect to decision-making. The opposite, counter-intuitive outcomes are obtained for males. Explanation and research suggestions are offered.
    Keywords: Non-cognitive skills, schooling choice, secondary education.
    JEL: J24 I21
    Date: 2007–09
  11. By: Ariga, Kenn; Brunello, Giorgio; Iwahashi, Roki; Rocco, Lorenzo
    Abstract: In spite of their relative vicinity Scandinavian countries and Central European countries (mainly Germany) have substantially different schooling institutions. While the former group of countries delays school tracking until age 16, the latter group anticipates differentiation between age 10 and age 13. This paper proposes a simple median voter model of school design which accounts rather well for these differences. The key idea is that voters weight the potential advantages of early tracking in terms of higher wages and human capital against the information loss associated to early selection.
    Keywords: Central Europe; Scandinavia; school tracking
    JEL: I21
    Date: 2007–11
  12. By: Ruth Uwaifo Oyelere (Georgia Institute of Technology and IZA)
    Abstract: Differences in geopolitical regions of Nigeria are not debatable. However, there is no clear consensus on the dimension of these disparities. In this paper, claims of geopolitical region disparities in labor market outcomes are investigated using survey data from Nigeria between 1996-1999. Both descriptive and econometric analysis are used to test the null hypothesis that there are no significant regional differences in labor market outcomes in Nigeria. The results are surprising given the anecdotal evidence and general perception of disparities along this dimension. First, similar mean incomes across regions in Nigeria were noted. In addition, returns to education were not significantly different for Northern and Southern Nigeria. Given these findings, the null hypothesis cannot be rejected. There is no evidence of significant disparities in labor market outcome across geopolitical regions in Nigeria.
    Keywords: regional disparities, labor market outcomes, Nigeria, returns to education, inequality
    JEL: O5 I0 J70 O18
    Date: 2007–09
  13. By: Louis-Philippe Morin (University of Ottawa and IZA)
    Abstract: The Local Average Treatment Effect (LATE) interpretation of the IV estimates of the returns to schooling is becoming increasingly popular. Typically, researchers reporting LATE estimates do not provide systematic evidence that there is substantial heterogeneity across different ability levels in returns, and without such evidence, the LATE interpretation is short of being compelling. The recent abolition of Grade 13 in Ontario’s secondary school system provides a unique opportunity to measure the benefits of an extra year of high school for high-ability students (those bound for college), rather than dropouts. I present a simple factor model which allows the value-added of Grade 13 (in terms of achievement) to be estimated, generalizing the standard difference-in-differences estimator to correct for heterogeneity in ability measurement across college subjects. The main finding is that the estimated return to an extra year of high school in terms of human capital is small for these high-ability students: students coming out of Grade 13 have a 2.2 point advantage (on a 100 point scale) over students from Grade 12, the estimated return to Grade 13 being around 2 percent. This evidence indicates that there is substantial heterogeneity in the return to an additional year of high school in the direction assumed in the prior literature.
    Keywords: return to schooling, factor model, difference-in-differences
    JEL: I20 I21 I28
    Date: 2007–10
  14. By: Jaan Masso; Raul Eamets; Hanna Kanep
    Abstract: The aim of the current paper is to estimate the need for new PhDs in the Estonian academic sector for the 5-year period 2007–2012 using a survey of employers, such as universities, institutions of applied higher education and research institutes. The doctoral workforce in all countries around the world constitutes a rather small segment of the labour market; however, PhDs provide a crucial input for educational and R&D activities not only through their employment in the academic sector, but nowadays also increasingly in the public and private sector. Our results show that academic institutions would prefer to hire a rather high proportion of new PhDs – almost 100% of the current number. On the one hand total demand is high due to a high replacement demand brought on by retirements in the next years as a result of the
    Keywords: PhD, higher education, research and development, academic fields
    JEL: I2 J4
    Date: 2007
  15. By: Francesca Francavilla (University of Florence); Gianna Claudia Giannelli (University of Florence, CHILD and IZA)
    Abstract: The paper deals with child labour in developing countries. We address a problem that has recently drawn much attention at the international level, that is, how to invest in women’s rights to advance the rights of both women and children. We study the problem from a new perspective. In our theoretical model we assume that the child’s time is an extension of her/his mother’s time, and that she has to decide how to allocate it. We estimate two empirical specifications, both multinomial logit. The first one, in line with the standard approach in the literature, estimates a model of the probability of the different child’s states, conditional on her/his mother’s states. The second empirical specification, in line with our theoretical model, estimates the mother-child states jointly. Using a unique, rich and representative data survey for all Indian states and for urban and rural India (NFHS-2, 1998/9), we select our sample drawing information from the household data set and the women’s data set. Our results show that the presence of the mother in the family increases children welfare, in terms of educational opportunities and protection from work activities. All our results indicate that the mother tends to stay home and send her children to school the better is the father’s employment position and the wealthier is the family. However, we observe a perverse effect. If the mother works, since female job quality and wage levels are very low, also her children have a higher probability to work.
    Keywords: child labour, education, women’s work, time allocation, India
    JEL: J13 J22 O15 O18
    Date: 2007–10
  16. By: Josef Fersterer (Landesstatistischer Dienst Salzburg); Jörn-Steffen Pischke (London School of Economics and IZA); Rudolf Winter-Ebmer (University of Linz, IHS Vienna, CEPR and IZA)
    Abstract: Little is known about the payoffs to apprenticeship training in the German speaking countries for the participants. There is a lot of heterogeneity in the types of apprenticeships offered, and there might be an important element of selection in who obtains an apprenticeship, and what type. To overcome the resulting ability bias we estimate returns to apprenticeship for apprentices in failed firms in Austria. When a firm fails, current apprentices cannot complete their training in this firm. Because apprentices will be at different stages in their apprenticeship, the failure of a firm will manipulate the length of the apprenticeship period completed for some apprentices. The time to failure therefore serves as an instrument for the length of the apprenticeship completed both at the original firm and at other firms. We find instrumental variables returns which are similar or larger than the OLS returns in our sample, indicating relatively little selection.
    Keywords: human capital, returns to schooling, firm-based training, ability bias
    JEL: J24 J31
    Date: 2007–10
  17. By: Takao Kato (Colgate University, Columbia Business School, University of Tokyo, Aarhus School of Business and IZA); Hideo Owan (Aoyama Gakuin University and Hitotsubashi University)
    Abstract: This paper explores theoretically and empirically potentially important yet often-neglected linkage between task coordination within the organization and the structure of organization and bundling of HRMPs (Human Resource Management Practices). In so doing, we also provide fresh insights on the interplay between the firm’s technological and output market characteristics and its choice of HRMP system. We begin with constructing a team-theoretic model and derive three task coordination modes: vertical control, horizontal coordination, and hybrid coordination. The model provides rich implications about complementarity involving task coordination modes, HRMPs, training and hiring, and management strategies, and illustrates how such complementarity is affected by the firm’s technological and output market conditions. Guided by the theoretical exploration, we analyze unique data from a new survey of Japanese firms which provide for the first time data on newer forms of HRMPs adopted by Japanese firms (such as cross-functional offline teams and self-managed online teams). One novel finding (which is consistent with the theory) is that the adoption of both self-managed online teams and cross-functional offline teams usually arises in firms with shop-floor committees while the introduction of cross-functional offline teams alone often takes place in firms with joint labor-management committees. We also confirm implications from our theory that firms in more competitive markets are more likely to adopt both types of teams while firms facing more erratic price movement tend not to adopt self-managed online teams.
    Keywords: HRM systems, task coordination, teams
    JEL: M5 L2 J53 D2
    Date: 2007–10
  18. By: Christian Dustmann (University College London, CReAM, CEP and IZA)
    Abstract: This paper studies parental investment in education and intergenerational earnings mobility for father-son pairs with native and foreign born fathers. We illustrate within a simple model that for immigrants, investment in their children is related to their return migration probability. In our empirical analysis, we include a measure for return probabilities, based on repeated information about migrants' return intentions. Our results suggest that educational investments in the son are positively associated with a higher probability of a permanent migration of the father. We also find that the son's permanent wages are positively associated with the probability of the father's permanent migration. Keywords: Intergenerational mobility, return intentions, educational investment, earnings.
    Keywords: intergenerational mobility, return intentions, educational investment, earnings
    JEL: J15 J24 J62
    Date: 2007–09

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