nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2008‒08‒31
sixteen papers chosen by
Fabio Sabatini
University of Siena

  1. If You Are So Smart, Why Aren’t You an Entrepreneur? Returns to Cognitive and Social Ability: Entrepreneurs versus Employees By Hartog, Joop; van Praag, Mirjam; van der Sluis, Justin
  2. Unbundled Institutions, Human Capital and Growth By Sambit Bhattacharyya
  3. Measurement of labor quality growth caused by unobservable characteristics By Thomas Bolli; Mathias Zurlinden
  4. Noncognitive Skills, Internet Use and Educational Dropout By Coneus, Katja; Gernandt, Johannes; Saam, Marianne
  5. The Portability of Human Capital and Immigrant Assimilation: Evidence for Spain By Sanromá, Esteve; Ramos, Raul; Simón, Hipólito
  6. Raising Education Achievement and Breaking the Cycle of Inequality in the United Kingdom By Anne-Marie Brook
  7. Evaluating the Effects of Vocational Training in Africa By Christian Kingombe
  8. Education - A Job Market Signal? (in Finnish with an English abstract/summary) By Topias Leino
  9. General Education vs. Vocational Training: Evidence from an Economy in Transition By Ofer Malamud; Cristian Pop-Eleches
  10. School Tracking and Access to Higher Education Among Disadvantaged Groups By Ofer Malamud; Cristian Pop-Eleches
  11. Breadth vs. Depth: The Timing of Specialization in Higher Education By Ofer Malamud
  12. The Impact of College Graduation on Geographic Mobility: Identifying Education Using Multiple Components of Vietnam Draft Risk By Ofer Malamud; Abigail Wozniak
  13. Experience vs. Obsolescence: A Vintage-Human-Capital Model By Kredler, Matthias
  14. FOLLOWING IN YOUR PARENTS’ FOOTSTEPS? Empirical Analysis of Matched Parent-Offspring Test Scores By Sarah Brown; Steve McIntosh; Karl Taylor
  15. A Pecking Order Analysis of Graduate Overeducation and Educational Investment in China By D Mayston; J Yang
  16. The Role of Childhood Health for the Intergenerational Transmission of Human Capital: Evidence from Administrative Data By Salm, Martin; Schunk, Daniel

  1. By: Hartog, Joop (University of Amsterdam); van Praag, Mirjam (University of Amsterdam); van der Sluis, Justin (University of Amsterdam)
    Abstract: How valuable are cognitive and social abilities for entrepreneurs’ incomes as compared to employees? We answer three questions: (1) To what extent does a composite measure of ability affect an entrepreneur's earnings relative to employees? (2) Do different cognitive abilities (e.g. math ability, language ability) and social ability affect earnings of entrepreneurs and employees differently?, and (3) Does the balance in these measured ability levels affect an individual's earnings? Our individual fixed-effects estimates of the differential returns to ability for spells in entrepreneurship versus wage employment account for selectivity into entrepreneurial positions as determined by fixed individual characteristics. General ability has a stronger impact on entrepreneurial incomes than on wages. Entrepreneurs and employees benefit from different sets of specific abilities: Language and clerical abilities have a stronger impact on wages, whereas mathematical, social and technical ability affect entrepreneurial incomes more strongly. The balance in the various kinds of ability also generates a higher income, but only for entrepreneurs: This finding supports Lazear's Jack-of-all-Trades theory.
    Keywords: (non-)cognitive abilities, intelligence, earnings, entrepreneur(ship), wage employment, income differentials
    JEL: J23 J24 J31 J44 M13
    Date: 2008–08
  2. By: Sambit Bhattacharyya
    Abstract: We investigate the partial effects of institutions and human capital on growth. We find that cross-country regressions of the log-level of per capita GDP on instrumented measures of institutions and schooling are uninformative about the relative importance of institutions and human capital in the long run because of multicollinearity problems. Using dynamic panel regressions we show that both institutions and human capital have significant effects on growth. Using Rodrik's (2005) four-way partition of institutions, we also unbundle institutions. We show that strong market creating institutions and market stabilising institutions are growth enhancing. Market regulating institutions matter up to a certain extent and market legitimising institutions does not seem to matter.
    Keywords: Institutions; Human Capital; Growth
    JEL: O11 O30 O43 O57
    Date: 2008
  3. By: Thomas Bolli (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Mathias Zurlinden (Swiss National Bank, Economic Analysis, Zurich)
    Abstract: The standard economy-wide indices of labor quality (or human capital) largely ignore the role of unobservable worker characteristics. In this paper, we develop a methodology for identifying the contri- butions of both observable and unobservable worker characteristics in the presence of the incidental parameter problem. Based on data for Switzerland over the period 1991-2006, we find that a large part of growth in labor quality is caused by shifts in the distribution of un- observable characteristics. The contributions to growth attributed to education and age are corrected downwards, if unobservable worker characteristics are taken into account. Yet the standard indices of la- bor quality appear to be robust to this extension.
    Keywords: human capital, labor quality
    JEL: J24 J31
    Date: 2008–07
  4. By: Coneus, Katja; Gernandt, Johannes; Saam, Marianne
    Abstract: Using data from the German Socio-Economic Panel for the years 2000 to 2006 we analyze the determinants and labor market effects of educational dropout. In addition to classical variables like family background and occupation, we examine noncognitive skills and Internet use. Noncognitive skills and Internet availability at home are negatively associated with the probability of becoming an educational dropout. The wage gap between dropouts and those with completed school and professional education vanishes for males once we control for additional characteristics such as occupations, professional Internet use and noncognitive skills. For females it is reduced to four percent.
    Keywords: education, unemployment, wages, noncognitive skills, computer use
    JEL: I21 J31 O30
    Date: 2008
  5. By: Sanromá, Esteve (University of Barcelona); Ramos, Raul (University of Barcelona); Simón, Hipólito (University of Alicante)
    Abstract: The existing literature on immigrant assimilation has highlighted the imperfect portability of human capital acquired by immigrants in their country of origin (Chiswick, 1978; Friedberg, 2000). This would explain the low levels of assimilation upon arrival in the new country, as well as the wide initial earnings gap. Recent studies (Chiswick and Miller, 2007 or Green, Kler and Leeves, 2007, among others) have dealt with this issue from the perspective of over-education. This study analyses the portability of immigrants’ human capital into the Spanish job market according to their geographic origin. It also aims to compare the most notable empirical regularities found in the aforementioned studies with the situation in Spain. The results obtained indicate differing degrees of the transferability of human capital depending on geographic origin, as transferability is greater for countries that are highly developed or have a similar culture or language and lower for developing countries and those with more distant cultures. The evidence is relatively disparate for the two components of human capital as although it is particularly clear for schooling, it is less so for experience. The results also confirm that in Spain immigrants suffer from over-education, in both incidence and intensity, implying a higher relative wage penalty and a greater negative impact on immigrants from the second group of countries. As an immigrant’s stay in Spain advances, a process of assimilation does exist, except for Asians and, in some circumstances, those from Sub-Saharan Africa, though the pace is very slow.
    Keywords: immigration, over-education, wages, assimilation
    JEL: J61 J31 J24
    Date: 2008–08
  6. By: Anne-Marie Brook
    Abstract: Globalisation, together with skill-biased technical change, is changing the composition of jobs in advanced economies and raising the level of skills required to do them. This has increased the importance of educating a large proportion of the population to much higher standards than in the past. The government in the United Kingdom has responded to this challenge by raising education spending and expanding the capacity of the education system in key areas such as pre-primary education and increasing participation in education beyond the age of 16. Nevertheless, performance on international tests of cognitive ability remains significantly below the standards of the best performing OECD countries and the education system seems to be particularly poor at ensuring good performance of pupils in the middle to bottom half of the education performance distribution. A renewed sense of urgency, together with some new approaches, is required to address the United Kingdom’s relative underperformance in literacy and numeracy. This paper proposes a number of avenues for encouraging a higher level of educational attainment, without significant further increases in expenditure. <P>Élever le niveau de formation et rompre le cycle de l’inégalité au Royaume-Uni <BR>La mondialisation, conjuguée à l’évolution technologique qui privilégie la main-d’oeuvre qualifiée, modifie la composition des emplois dans les économies avancées et entraîne un relèvement du niveau des qualifications requises pour les occuper. Aussi est-il aujourd’hui plus important d’amener une grande proportion de la population à un niveau de formation infiniment plus élevé que dans le passé. Pour relever ce défi, les pouvoirs publics au Royaume-Uni ont augmenté les dépenses d’éducation, renforcé les moyens dont dispose le système éducatif dans des secteurs clés tels que l’éducation pré-primaire, et prolongé la scolarisation au-delà de l’âge de 16 ans. Malgré cela, les résultats de ce pays aux tests internationaux d’aptitudes intellectuelles restent sensiblement inférieurs au niveau atteint par les pays de l’OCDE les plus performants et le système éducatif britannique semble avoir beaucoup de mal à faire en sorte que les élèves situés dans la moitié inférieure de la distribution des performances en éducation obtiennent de bons résultats. Une conscience redoublée de l’urgence et quelques nouvelles approches s’imposent pour remédier aux sous-performances relatives du Royaume-Uni dans la maîtrise de l’écrit et des chiffres. Cet ouvrage propose un certain nombre de pistes pour favoriser un relèvement du niveau d’instruction sans pour autant accroître encore notablement les dépenses.
    Keywords: United Kingdom, Royaume-Uni, education, éducation, financement, funding
    JEL: H52 H75 I20 I22 I28
    Date: 2008–08–28
  7. By: Christian Kingombe
    Abstract: More and better data are needed to monitor and evaluate the impact of vocational training on economic growth and poverty reduction. Labour market observatories can help align training systems to labour market needs. Analysis of youth unemployment is essential before investing in expensive training schemes.
    Date: 2008–04
  8. By: Topias Leino
    Keywords: education, job market signalling, sorting, screening, Finnish comprehensive school reform, human capital
    JEL: I21 J31
    Date: 2008–08–20
  9. By: Ofer Malamud; Cristian Pop-Eleches
    Abstract: This paper examines the relative benefits of general education and vocational training in Romania, a country which experienced major technological and institutional change during its transition from Communism to a market economy. To avoid the bias caused by non-random selection, we exploit a 1973 educational reform which shifted a large proportion of students from vocational training to general education while keeping average years of schooling unchanged. Using data from the 1992 and 2002 Romanian Censuses and household surveys from 1995-2000, we analyze the effect of this policy with a regression discontinuity design. We found that men in cohorts affected by the policy were significantly less likely to work in manual or craft-related occupations than their counterparts who were unaffected by the policy. However, in contrast to cross-sectional findings, we found no difference in labor market participation or earnings between cohorts affected and unaffected by the policy. We therefore conclude that differences in labor market returns between graduates of vocational and general schools are largely driven by selection.
    Keywords: Romania, vocational training, general education
    Date: 2008–05
  10. By: Ofer Malamud; Cristian Pop-Eleches
    Abstract: When students are tracked into vocational and academic secondary schools, access to higher education is usually restricted to those who were selected into the academic track. Postponing such tracking may increase the relative educational attainment of disadvantaged students if they have additional time in school to catch up with their more privileged counterparts. On the other hand, if ability and expectations are fairly well set by an early age, postponing tracking during adolescence may not have much effect. This paper exploits an educational reform in Romania to examine the impact of postponing tracking on the proportion of disadvantaged students graduating from university using a regression discontinuity (RD) design. We show that, although students from poor, rural areas and with less educated parents were significantly more likely to finish an academic track and become eligible to apply for university after the reform, this did not translate into an increase in university completion. Our findings indicate that simply postponing tracking, without increasing the slots available in university, is not sufficient to improve access to higher education for disadvantaged groups.
    Keywords: tracking, higher education, access, disadvantaged students
    Date: 2008–05
  11. By: Ofer Malamud
    Abstract: This paper examines the tradeoff between early and late specialization in the context of higher education. While some educational systems require students to specialize early by choosing a major field of study prior to entering university, others allow students to postpone this choice. I develop a model in which individuals, by taking courses in different fields of study, accumulate field-specific skills and receive noisy signals of match quality in these fields. With later specialization, students have more time to learn about match quality in each field but less time to acquire specific skills once a field is chosen. I derive comparative static predictions between educational regimes with early and late specialization, and examine these predictions across British systems of higher education. Using survey data on 1980 university graduates, I find strong evidence in support of the prediction that individuals who switch to unrelated occupations initially earn lower wages but less evidence that the cost of switching differs between England and Scotland. Although more switching occurs in England where students specialize early, higher wage growth among those who switch eliminates the wage difference after several years. Together, these findings suggest that later specialization in Scotland is beneficial during the initial years in the labor market but that differences between early and late specialization do not persist over time.
    Keywords: specialization, higher education, England, Scotland
    Date: 2007–10
  12. By: Ofer Malamud; Abigail Wozniak
    Abstract: College-educated workers are twice as likely as high school graduates to make lasting long-distance moves, but little is known about the role of college itself in determining geographic mobility. Unobservable characteristics related to selection into college might also drive the relationship between college education and geographic mobility. We explore this question using a number of methods to analyze both the 1980 Census and longitudinal sources. We conclude that the causal impact of college completion on subsequent mobility is large. We introduce new instrumental variables that allow us to identify educational attainment and veteran status separately in a sample of men whose college decisions were exogenously influenced by their draft risk during the Vietnam War. Our preferred IV estimates imply that graduation increases the probability that a man resides outside his birth state by approximately 35 percentage points, a magnitude nearly twice as large as the OLS migration differential between college and high school graduates. IV estimates of graduation’s impact on total distance moved are even larger, with IV estimates that exceed OLS considerably. We provide evidence from the National Longitudinal Survey of Youth (NLSY) 1979 that our large IV estimates are plausible and likely explained by heterogeneous treatment effects. Finally, we provide some suggestive evidence on the mechanisms driving the relationship between college completion and mobility.
    Keywords: geographic mobility, college, higher education, vietnam
    Date: 2008–03
  13. By: Kredler, Matthias
    Abstract: I combine an infinite-horizon version of Ben-Porath’s (1967) model of human-capital accumulation with a vintage structure as in Chari & Hopenhayn (1991). Different skill levelsinside a vintage are complementary in production. Vintage-specific human capital is accumulated based on workers’ optimal strategies and is lost when the technology is phased out by an endogenous firm decision. I establish equivalence between competitive equilibrium and a planner’s problem. It is shown that returns to skill are highest in young vintages. Accelerated technological change shortens the life cycle of a technology and speeds up obsolescence; the premium on tenure rises because more workers are concentrated in young technologies with high skill premia. A calibration exercise comparing two steady states shows that the model quantitatively accounts for the changes in the experience premium, earnings dispersion and earnings turbulence in German data.
    Keywords: Vintage human capital; age-earnings profiles; partial differential equations
    JEL: E24 C63 J01
    Date: 2008–07–28
  14. By: Sarah Brown; Steve McIntosh; Karl Taylor (Department of Economics, The University of Sheffield)
    Abstract: In this paper, we explore whether an intergenerational relationship exists between the reading and mathematics test scores, taken at ages 7, 11 and 16, of a cohort of individuals born in 1958 and the equivalent test scores of their offspring measured in 1991. Our results suggest that how the parent performs in reading and mathematics during their childhood is positively related to the corresponding reading and mathematics test scores of their offspring as measured at a similar age. Our findings imply that parental ability in numeracy and literacy as a child is positively associated with the ability in numeracy and literacy of their offspring. With respect to gender, a father´s (mother´s) test score generally has a positive influence on the test scores of their daughter (son).
    Keywords: Human Capital, Intergenerational Transfers, Literacy, Numeracy
    JEL: J13 J24
    Date: 2007–12
  15. By: D Mayston; J Yang
    Abstract: Against the background of the recent rate of expansion of China's higher education system that has outstripped even China's own high rate of economic growth, the paper examines evidence of the emerging problem of graduate overeducation within China. Based upon a pecking-order model of employment offers and associated ordered probit model, it analyses the empirical factors which determine the incidence of graduate overeducation across China. The extent to which individual students have an incentive to become overeducated compared to a socially optimal level of their education is also examined in the context of a supporting economic model that compares individual and socially optimal levels of investment in education, in the face of labour market demands. The extent of the divergence between individual and socially optimal levels of investment in education, and of the associated levels of graduate overeducation, is found to depend upon how recent major increases in the supply of graduates within China will interact with the future growth rates in job specifications, in demand variables and in resultant graduate wages within China.
    Keywords: Graduate overeducation. higher education policy. Optimal education investment. Economic growth in China
    Date: 2008–08
  16. By: Salm, Martin (University of Mannheim); Schunk, Daniel (University of Zurich)
    Abstract: We use unique administrative German data to examine the role of childhood health for the intergenerational transmission of human capital. Specifically, we examine the extent to which a comprehensive list of health conditions – diagnosed by government physicians – can account for developmental gaps between the children of college educated parents and those of less educated parents. In total, health conditions explain 18% of the gap in cognitive ability and 65% of that in language ability, based on estimations with sibling fixed effects. Thus, policies aimed at reducing disparities in child achievement should also focus on improving the health of disadvantaged children.
    Keywords: health inequality, human capital formation, childhood health, intergenerational mobility
    JEL: J13 I20 I12
    Date: 2008–08

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