nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2010‒02‒20
nine papers chosen by
Fabio Sabatini
University of Siena

  1. A Pause in the Growth of Inequality in China? By Richard Herd
  2. The Impact of Training on Productivity and Wages: Firm Level Evidence By Konings, Jozef; Vanormelingen, Stijn
  3. The end of subsistence farming: Growth dynamics and investments in human and environmental capital in rural Ethiopia By Erreygers G.; Ferede T.
  4. Returning to the Question of a Wage Premium for Returning Migrants By Barrett, Alan; Goggin, Jean
  5. Estimating the Technology of Cognitive and Noncognitive Skill Formation By Flavio Cunha; James Heckman; Susanne Schennach
  6. Spellings Commission Report on Affordability and Access to Higher Education: changing demographics, economic crisis and investment in human capital By Orkodashvili, Mariam
  7. Limited Capital Market Participation and Human Capital Risk By Jonathan Berk; Johan Walden
  8. Population, Innovation, Competition and Growth with and without Human Capital Investment By Alberto Bucci
  9. The battle for talent: globalisation and the rise of executive pay By Dalia Marin

  1. By: Richard Herd
    Abstract: In recent years, policymaking in China has put increasing emphasis on stemming the growth in inequality, which had been fairly steep since the 1980s. Policy action has taken the form of regional development measures and of reforms of various aspects of the social safety net broadly defined. The Western Development Plan has aimed at narrowing the income gap between the sparsely populated and under-developed West and the more prosperous and faster-growing East. The bulk of the expenditure, however, has been on large capital-intensive projects rather than on education and other social spending. More emphasis on education would help reduce the income gap, since human capital is a key determinant of income. Government policies to improve conditions in rural areas nationwide have involved a substantial reduction in the burden of regressive taxes and fees. Welfare assistance has also evolved: a minimum living allowance has been introduced in urban and more recently in rural areas, but it has not reduced poverty that much, not least because of how it is administered. Moreover, the financing of this allowance ought to rely more on national solidarity and its delivery needs to be better co-ordinated with that of other social benefits. A set of new indicators of nationwide inequality, based on household survey data, suggests that overall inequality has ceased to increase in recent years, and may even have inched down. Alternative measures of income inequality across provinces show that, if migration is taken into account, disparities are markedly less, and have tended to decline somewhat in recent years. Even so, geographical inequality remains very high by international standards. It reflects intra- more than inter-provincial differences, pointing to persistent, if diminishing, labour market segmentation.<P>Une pause dans le creusement des inégalités en Chine ?<BR>Ces dernières années, la volonté d’endiguer l’accentuation des inégalités, qui tendaient à se creuser depuis les années 1980, a pris une place grandissante dans les grandes orientations chinoises. L’action publique s’est traduite par des mesures de développement régional et des réformes de divers aspects du filet de sécurité sociale au sens large. La stratégie de mise en valeur de l’Ouest a visé à réduire l’écart de revenu entre cette partie du pays peu peuplée et insuffisamment développée et l’Est plus prospère où la croissance est plus rapide. Toutefois, les dépenses ont, pour l’essentiel, privilégié les grands projets à forte intensité de capital par rapport à l’éducation et à d’autres préoccupations sociales. Un recentrage sur l’éducation contribuerait à réduire les disparités en termes de revenu, celui-ci étant largement déterminé par le capital humain. Les politiques menées par le gouvernement pour améliorer la situation des campagnes dans tout le pays ont veillé à alléger sensiblement le poids des impôts et prélèvements régressifs. L’aide sociale a également évolué : une garantie de minimum vital a été instaurée dans les zones urbaines puis, il y a peu, dans les zones rurales, sans pour autant faire véritablement reculer la pauvreté, ne serait-ce qu’en raison de ses modalités administratives. Par ailleurs, le financement de cette garantie de minimum vital devrait reposer davantage sur la solidarité nationale, et une coordination plus étroite s’impose avec l’attribution d’autres prestations sociales. D’après un ensemble de nouveaux indicateurs nationaux, conçus à partir de données d’enquêtes sur les ménages, les inégalités globales n’augmentent plus depuis quelques années ; peut être même ont-elles diminué. Il ressort d’autres mesures des inégalités de revenu entre provinces que si les migrations entrent en ligne de compte, le fossé est nettement moins grand, et tend à se combler quelque peu. Les inégalités géographiques n’en restent pas moins très fortes par rapport aux normes internationales. Le phénomène s’explique par des différences plus intra qu’interprovinciales, et renvoie à une segmentation du marché du travail persistante, bien qu’elle aille en s’estompant.
    Keywords: human capital, education, migration, social assistance, China, poverty, income inequality, hukou, labour market segmentation, capital humain, éducation, pauvreté, inégalité des revenus, Chine, migration, assistance sociale, hukou, segmentation du marché du travail
    JEL: D31 D63 E24 E64 H52 H53 H54 H55 H75 I28 I32 I38 J42 J61 O15 O53 P25 P36 R58
    Date: 2010–02–01
  2. By: Konings, Jozef (Catholic University of Leuven); Vanormelingen, Stijn (Catholic University of Leuven)
    Abstract: This paper uses firm level panel data of firm provided training to estimate its impact on productivity and wages. To this end the strategy proposed by Ackerberg, Caves and Frazer (2006) for estimating production functions to control for the endogeneity of input factors and training is applied. The productivity premium for a trained worker is estimated at 23%, while the wage premium of training is estimated at 12%. Our results give support to recent theories that explain work related training by imperfect competition in the labor market.
    Keywords: training, production functions, human capital
    JEL: J24 J31 L22
    Date: 2010–01
  3. By: Erreygers G.; Ferede T.
    Abstract: In settings characterized by weak human capital and agricultural land degradation, investments in human capital formation and land conservation can be key candidates for triggering sustained economic growth. In this study, based on insights from growth literature and models of economic transformation, we develop a framework to examine the dynamic interactions between income, human and natural capital in rural Ethiopia. In addition, the trade-offs and complementarities of economic and environmental policies in terms of their impact on growth, investments in human capital formation and land conservation are assessed. The study underscores the centrality of interconnectedness and reciprocal influences between growth and investments in human and natural capital in understanding the long-run implications of policy reforms. Development interventions that are crucial for achieving broad-based and sustainable improvements in household income, human and natural capital are identified, which have wider implications for settings sharing similar socioeconomic characteristics.
    Date: 2009–09
  4. By: Barrett, Alan (ESRI, Dublin); Goggin, Jean (ESRI, Dublin)
    Abstract: Using data from a large-scale survey of employees in Ireland, we estimate the extent to which people who have emigrated from Ireland and returned earn more relative to comparable people who have never lived abroad. In so doing, we are testing the hypothesis that migration can be part of a process of human capital formation. We find through OLS estimation that returners earn 7 percent more than comparable stayers. We test for the presence of self-selection bias in this estimate but the tests suggest that the premium is related to returner status. The premium holds for both genders, is higher for people with post-graduate degrees and for people who migrated beyond the EU to the US, Canada, Australia and New Zealand. The results show how emigration can be positive for a source country when viewed in a longer term context.
    Keywords: return migration, Ireland, brain drain, brain circulation
    JEL: J61 O15
    Date: 2010–02
  5. By: Flavio Cunha; James Heckman; Susanne Schennach
    Abstract: This paper formulates and estimates multistage production functions for childrens' cognitive and noncognitive skills. Skills are determined by parental environments and investments at different stages of childhood. We estimate the elasticity of substitution between investments in one period and stocks of skills in that period to assess the benefits of early investment in children compared to later remediation. We establish nonparametric identification of a general class of production technologies based on nonlinear factor models with endogenous inputs. A by-product of our approach is a framework for evaluating childhood and schooling interventions that does not rely on arbitrarily scaled test scores as outputs and recognizes the differential effects of the same bundle of skills in different tasks. Using the estimated technology, we determine optimal targeting of interventions to children with different parental and personal birth endowments. Substitutability decreases in later stages of the life cycle in the production of cognitive skills. It increases slightly in later stages of the life cycle in the production of noncognitive skills. This finding has important implications for the design of policies that target the disadvantaged. For some configurations of disadvantage and for some outcomes, the return to investments in the later stages of childhood may exceed that to investments in the early stage.
    JEL: C31 J13
    Date: 2010–01
  6. By: Orkodashvili, Mariam
    Abstract: The paper discusses report of The Spellings Commission for Future of Higher Education that was set up to look into the issues facing the higher education system in the U.S., outline the challenges and offer recommendations to tackle the problems. Most importantly, The Spellings Commission Report raised the issue of the role of federal government in the development of higher education system. The paper focuses on one of the issues raised by the Spellings Commission, access to higher education. The paper suggests that today access still remains an issue for higher education in the U.S. Adjusting to changing demographic trends, increased ethnic diversity and increased enrollments with limited federal resources and complicated federal aid system is still a challenge of the future. The question that remains to be answered is: ‘Will the federal government sustain its traditional commitment to equalizing opportunities for higher education?’
    Keywords: changing demographics; economic development; economic growth; access to higher education; equity and affordability; federal funding of higher education; workforce; investment in human capital; social capital growth.
    JEL: J41 Z13 H53 I22 J11 E24 N30 J0 A14 A23 O15 I21 A22 A13 A12 I28 H52
    Date: 2009–11–23
  7. By: Jonathan Berk; Johan Walden
    Abstract: The non-tradability of human capital is often cited for the failure of traditional asset pricing theory to explain agents' portfolio holdings. In this paper we argue that the opposite might be true --- traditional models might not be able to explain agent portfolio holdings because they do not explicitly account for the fact that human capital does trade (in the form of labor contracts). We derive wages endogenously as part of a dynamic equilibrium in a production economy. Risk is shared in labor markets because firms write bilateral labor contracts that insure workers, allowing agents to achieve a Pareto optimal allocation even when the span of asset markets is restricted to just stocks and bonds. Capital markets facilitate this risk sharing because it is there that firms offload the labor market risk they assumed from workers. In effect, by investing in capital markets investors provide insurance to wage earners who then optimally choose not to participate in capital markets. The model can produce some of the most important stylized facts in asset pricing: (1) limited asset market participation, (2) the seemingly high equity risk premium, (3) the very large disparity in the volatility of consumption and the volatility of asset prices, and (4) the time dependent correlation between consumption growth and asset returns.
    JEL: G11 G12 J24
    Date: 2010–01
  8. By: Alberto Bucci (University of Milan)
    Abstract: This paper analyzes how population and product market competition may interact with each other in affecting the pace of productivity growth. We find that the impact of a change in population (size/growth) and in the degree of market concentration on economic growth varies depending on the structure of the underlying model economy and, more precisely, depending on the presence of purposeful human (versus physical) capital investment, the type of input used in the uncompetitive sector, the form of households' intertemporal utility and whether product market competition (measured by the elasticity of substitution between differentiated intermediates) is disentangled or not from the input-shares in total income. We also find that only a fully endogenous growth model with purposeful human capital investment at the individual level and a continuum of degrees of inter-generational altruism is simultaneously able to predict an ambiguous link between population and economic growth rates and to display no strong scale effects in economic growth, while keeping the property that positive economic growth is feasible even without any population change. The paper also examines the conditions under which population (size/growth) and product market competition/monopoly power can be complementary factors in economic growth.
    Keywords: Population (size and growth); Endogenous and Semi-endogenous Economic Growth; Human and Physical Capital Investment; Innovation; Scale Effects; Competition,
    Date: 2009–11–26
  9. By: Dalia Marin
    Abstract: This paper explores the role of globalisation in the rise of executive pay in Austria and Germany. According to Dalia Marin, firms more exposed to international competition engage in talent fairs to search and attract skilled workers. She also finds that seniority related pay varies for different levels of foreign competition suggesting that firms increase CEO pay when faced with the threat of losing their senior executives, while seniority in office itself does not lead to higher pay. These findings support the idea of a 'war for talent' that is triggered by international trade.
    Date: 2009–02

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