nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2009‒12‒11
thirteen papers chosen by
Fabio Sabatini
University of Siena

  1. Human Capital and Regional Wage Gaps. By Enrique López-Bazo; Elisabet Motellón
  2. Human Capital Spillovers, Productivity and Regional Convergence in Spain By Ramos, Raul; Surinach, Jordi; Artís, Manuel
  3. Local Human Capital Externalities and Wages at the Firm Level: The Case of Italian Manufacturing By Bratti, Massimiliano; Leombruni, Roberto
  4. Does Human Capital Protect Workers against Exogenous Shocks? South Africa in the 2008-2009 Crisis By Leung, Ron; Stampini, Marco; Vencatachellum, Désiré
  5. How Fast Do Wages Adjust to Human-Capital Productivity? Dynamic Panel-Data Evidence from Belgium, Denmark and Finland By Andini, Corrado
  6. Literacy Traps: Society-wide Education and Individual Skill Premia By Vidya Atal
  7. Investment in Human Capital during Incarceration and Employment Prospects of Prisoners By Giles, Margaret; Le, Anh Tram
  8. Does Perceived Support in Employee Development Affect Personnel Turnover? By Koster Fleur; Grip Andries de; Fouarge Didier
  9. Schooling, Cognitive Skills, and the Latin American Growth Puzzle By Hanushek, Eric A.; Woessmann, Ludger
  10. The Effects of Spousal Education on Individual Earnings – A Study of Married Swedish Couples By Åström, Johanna
  11. Inequality, Human Capital and Development: Making the Theory Face the Facts By Papageorgiou, Chris; Razak, Nor Azam Abdul
  12. Marriage, Money and Migration By Åström, Johanna
  13. The Effects of Assortative Mating on Earnings: Human Capital Spillover or Specialization? By Åström, Johanna

  1. By: Enrique López-Bazo (Faculty of Economics, University of Barcelona); Elisabet Motellón (Faculty of Economics, University of Barcelona)
    Abstract: This paper uses micro-level data to analyse the effect of human capital on regional wage differentials. The results for the set of Spanish regions confirm that they differ in the endowment of human capital, but also that the return that individuals obtain from it varies sharply across regions. Regional heterogeneity in returns is especially intense in the case of education, particularly when considering its effect on the employability of individuals. These differences in endowment and, especially, in returns to human capital, account for a significant proportion of regional wage gaps.
    Keywords: Education, Experience, Regional disparities, Returns to human capital, Wage gap decomposition.
    Date: 2009–11
  2. By: Ramos, Raul (University of Barcelona); Surinach, Jordi (University of Barcelona); Artís, Manuel (University of Barcelona)
    Abstract: This paper analyses the differential impact of human capital, in terms of different levels of schooling, on regional productivity and convergence. The potential existence of geographical spillovers of human capital is also considered by applying spatial panel data techniques. The empirical analysis of Spanish provinces between 1980 and 2007 confirms the positive impact of human capital on regional productivity and convergence, but reveals no evidence of any positive geographical spillovers of human capital. In fact, in some specifications the spatial lag presented by tertiary studies has a negative effect on the variables under consideration.
    Keywords: regional convergence, productivity, human capital composition, geographical spillovers
    JEL: O18 O47 R23
    Date: 2009–11
  3. By: Bratti, Massimiliano (University of Milan); Leombruni, Roberto (University of Turin)
    Abstract: We use a unique firm-level data set merging administrative information on average wages paid by firms by skill level (blue collars and white collars), Population Census information on the local stock of human capital available to firms and survey information on firm characteristics to investigate the existence and magnitude of local human capital externalities in Italian Manufacturing. The latter represents an interesting case study due to the prevalence of small family business and a technological lag with respect to the US, to which most evidence supporting local human capital spillovers refers. Our estimates show that in Italy, like in the US, firms located in geographical areas with a higher stock of human capital pay higher wages. This evidence is robust to many variants of the econometric specification and to addressing potential endogeneity issues using instrumental variables estimation and instruments based on the lagged expansion of the Italian higher education system and the lagged demographic structure.
    Keywords: firm, local human capital externalities, Italy, manufacturing, wages
    JEL: J24 J31 I20
    Date: 2009–12
  4. By: Leung, Ron (African Development Bank); Stampini, Marco (African Development Bank); Vencatachellum, Désiré (African Development Bank)
    Abstract: The financial and economic crisis of 2008 and 2009 has taken its toll on the South African economy. The economy contracted for the first time since 1998, and entered recession during the fourth quarter of 2008. The GDP contraction was soon transmitted to the labor market. Between the second quarters of 2008 and 2009, employment fell by 3.8 percent. However, not all individuals were hit with the same intensity. Using labor force survey data unique in the African context, we find that human capital provided a buffer against the shock. After controlling for observable characteristics, education and experience showed the potential to entirely offset the effect of the recession on the likelihood of employment. This has important policy implications, as it strengthens the case for strategic investments in human capital, and helps identifying the unskilled as those with the highest need for social safety net interventions during the recession.
    Keywords: labor markets, South Africa, financial crisis, human capital, business cycle, emerging economies
    JEL: J2 E3
    Date: 2009–12
  5. By: Andini, Corrado (University of Madeira)
    Abstract: The standard human-capital model is based on the assumption that the observed wage of an individual is equal to the monetary value of the individual net human-capital productivity, the so-called net potential wage. We argue that this assumption is rejected by the ECHP data for Belgium, Denmark and Finland. The empirical evidence supports a dynamic approach to the Mincer equation where no equality is imposed but an adjustment between observed and potential earnings is allowed to take place over time. Controlling for regressors' endogeneity, individual heterogeneity and time effects, we estimate a dynamic panel-data wage equation and provide measures of the speed of adjustment in Belgium, Denmark and Finland. Further, we elaborate on the implications of a dynamic approach to the Mincer equation for the computation of the return to schooling, including the implication that this return is not independent of labor-market experience, as suggested by Heckman et al. (2005) and Belzil (2007). Finally, we show that a dynamic wage equation can be seen as the solution of a simple wage-bargaining model and argue that a micro-founded model can fit the data better than a simple adjustment model but requires more theoretical assumptions.
    Keywords: Mincer equation, wages, human capital
    JEL: I21 J31
    Date: 2009–11
  6. By: Vidya Atal
    Abstract: Using a model of O-ring production function, the paper demonstrates how certain communities can get caught in a low-literacy trap in which each individual finds it not worthwhile investing in higher skills because others are not high-skilled. The model sheds light on educational policy. It is shown that policy for promoting human capital has to take the form of a mechanism for solving the coordination failure in people's choice of educational strategy.
    Keywords: education, people, O-ring, skill formation, economy, human capital, production function, communities, literacy trap, skills, educational policy, strategy, Literacy, Society
    Date: 2009
  7. By: Giles, Margaret (Edith Cowan University); Le, Anh Tram (University of Western Australia)
    Abstract: The costs of incarceration and recidivism to the community are substantial. These costs not only include the direct costs of imprisonment but also the opportunity costs arising from depletion of human capital and loss of output. Policy makers have emphasised the importance of rehabilitating prisoners as a way of reducing recidivism. Consequently, the management of prisoners has changed, with more prisoners being encouraged to undertake some form of education, training and/or work during their incarceration in conjunction with any behavioural management programmes. This paper examines, using the 2003 Survey of Prisoners in Western Australia, the decision of prisoners to invest in education/training during their prison term and the potential labour market outcomes of this investment. The results suggest that prisoners use education/training to improve their skills in preparation for release from prison. From this perspective it can be argued that these prisoners see education/training as an investment in human capital rather than consumption. In addition, the decision to participate in either education or training is non-random and varies across the time remaining on the prison sentence, thus suggesting prisoners view education and training as different activities. However, the results show the expected benefit prisoners place on education and training is similar.
    Keywords: prisoners, education, training, employment
    JEL: I20 J01 J21
    Date: 2009–11
  8. By: Koster Fleur; Grip Andries de; Fouarge Didier (ROA rm)
    Abstract: Th is paper focuses on the question whether it is benefi cial for fi rms to invest inthe general skills of their workforce or that these training investments merelyencourage personnel turnover. We examine two contrary theoretical perspectives onhow investments in employee development are related to their turnover behaviour.Estimation results derived from a sample of 2,833 Dutch pharmacy assistants showthat participation in general training does not induce the intention of assistantsto quit, as predicted by human capital theory. We fi nd that a fi rm’s investmentsin general training, signifi cantly contribute to the perceived support in employeedevelopment (PSED) among their workforce. Our results also show that PSED isnegatively related to the intention of employees to quit the fi rm. Th is eff ect is to alarge extent mediated by the job satisfaction of pharmacy assistants. Our fi ndingssupport the importance of social exchange theory in explaining turnover behaviour asa consequence of personnel development practices. It should be noted, however, thatPSED only diminishes the intention to quit for other occupations.
    Keywords: education, training and the labour market;
    Date: 2009
  9. By: Hanushek, Eric A. (Stanford University); Woessmann, Ludger (Ifo Institute for Economic Research)
    Abstract: Economic development in Latin America has trailed most other world regions over the past four decades despite its relatively high initial development and school attainment levels. This puzzle can be resolved by considering the actual learning as expressed in tests of cognitive skills, on which Latin American countries consistently perform at the bottom. In growth models estimated across world regions, these low levels of cognitive skills can account for the poor growth performance of Latin America. Given the limitations of worldwide tests in discriminating performance at low levels, we also introduce measures from two regional tests designed to measure performance for all Latin American countries with internationally comparable income data. Our growth analysis using these data confirms the significant effects of cognitive skills on intra-regional variations. Splicing the new regional tests into the worldwide tests, we also confirm this effect in extended worldwide regressions, although it appears somewhat smaller in the regional Latin American data than in the worldwide data.
    Keywords: human capital, economic growth, cognitive skills, Latin America
    JEL: H4 I2 O4 N16
    Date: 2009–11
  10. By: Åström, Johanna (Department of Economics, Umeå University)
    Abstract: A positive association between spousal education and individual earnings is a common empirical finding (e.g., Benham, 1974 and Rossetti and Tanda, 2000). The two most common explanations for this are sample selection and crossproductivity effects. Can spouses really benefit from each other’s human capital in the labour market, or does the entire association stem from assortative mating? In this study, we control for time-invariant heterogeneity that may be correlated with the spouse’s education level and use a rich data set that includes observations of individuals when they are single and when they are married. The results support the cross-productivity hypothesis for both males and females. Furthermore, couples with education within the same field experience even larger effects.
    Keywords: Marriage; Education; Human capital spillover
    JEL: I21 J12 J24
    Date: 2009–11–27
  11. By: Papageorgiou, Chris; Razak, Nor Azam Abdul
    Abstract: Recent theoretical contributions assert that income inequality impacts negatively human capital accumulation, and consequently long-run growth. Galor and Zeira (1993) show that such a relationship works primarily through financial constraints, while de la Croix and Doepke (2003) demonstrate that the relationship could also work via differential fertility between poor and rich. In this paper, we first test the inequality-human capital-output hypothesis in a sample of 46 countries for the period 1970—2000. In the baseline estimation specification and various robustness checks, we obtain results that lend strong support to this relationship. Second, we examine which of the two mechanisms, finds more support in the data. and show evidence in favor of the differential fertility mechanism.
    Keywords: Income inequality; financial constraints; fertility differentials; human capital; economic growth
    JEL: O11 O15 O40
    Date: 2009–11–30
  12. By: Åström, Johanna (Department of Economics, Umeå University)
    Abstract: The thesis consists of a summary and four self-contained papers. Paper [I] examines the effects of interregional migration on gross earnings in married and cohabiting couples. In particular, we examine the link between education level and income gains. We find that pre-migration education level is a key determinant of migration and economic outcomes and is also a determinant of the effect of migration on income distribution within the household. The positive average effect on household earnings is largely explained by income gains among highly-educated males. Females generally experience no significant income gain from migration in absolute terms. Paper [II] analyzes the effect of the spouse’s education on individual earnings. In this study, we control for time-invariant heterogeneity that may be correlated with the spouse’s education level and use a rich data set that includes observations of individuals when they are single and when they are married. The results support the hypothesis of cross-productivity for both males and females. Furthermore, couples with education within the same field experience even larger effects. In Paper [III] we aim to study how the spouse’s productivity in the labor market affects one’s own individual earnings when married. Using longitudinal data on individuals as both single and married allows us to estimate the spouses’ productivity as single persons and thereby avoid problems of endogeneity between the two spouses’ labor market performances. Productivity is approximated with residuals from estimates of pre-marriage earnings equations. Results indicate that there are negative effects of the spouse’s productivity on individual earnings for both males and females, and that this effect appears to be enhanced by the duration of the marriage. Paper [IV] studies spousal matching on earnings for females in secondorder marriages. We aim to follow women who marry, divorce, and subsequently remarry compared with females who marry and stay married over the course of the study interval. Overall, we find significant positive correlations for all three of the marital partitions. The correlation tends to be smaller for the first of a sequence of marriages for women who divorce than for women who marry and stay so. For the second of the successive marriages, however, the correlation of the residuals is larger than that for women who marry but once.
    Keywords: Regional migration; two earner households; marriage; education; human capital spillover; specialization; assortative mating; remarriage
    JEL: D10 I21 J12 J24 J61
    Date: 2009–11–27
  13. By: Åström, Johanna (Department of Economics, Umeå University)
    Abstract: This paper studies how the spouse’s productivity in the labor market affects one’s individual earnings when married. Theoretically, the high productivity of a spouse in a marriage could affect the other spouse’s earnings in two ways: negatively through specialization and division of labor, or positively from human capital spillover. Using longitudinal microdata on individuals as both single and married people allows us to estimate the spouses’ productivity as a single persons and thereby avoid problems of endogeneity between the two spouses’ labor market performances. Productivity is approximated with residuals from estimates of pre-marriage earnings equations. Results indicate that there are negative effects of the spouse’s productivity on individual earnings for both males and females, and that this effect appears to be enhanced by the duration of the marriage. However, closer examination shows that only the youngest groups of males and females experience this negative effect. In addition, there is some evidence for a positive effect of the husband’s productivity on earnings in the case of older groups of females.
    Keywords: Marriage; Assortative mating; Earnings; Specialization
    JEL: D10 J12
    Date: 2009–11–27

This nep-hrm issue is ©2009 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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