nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2010‒04‒17
eighteen papers chosen by
Fabio Sabatini
University of Siena

  1. Technological Change, Human Capital Structure, and Multiple Growth Paths By Kim, Yong Jin; Lee, Jong-Wha
  2. On the Robustness of Brain Gain Estimates By Michel Beine; Frédéric Docquier; Hillel Rapoport
  3. Skill and Cross-National Economic Performance By Florida, Richard; Mellander, Charlotta
  4. The Value of Human Capital during the Second Industrial Revolution—Evidence from the U.S. Navy By Darrell J. Glaser; Ahmed S. Rahman
  5. Are there social returns to both firm-level and regional human capital? – Evidence from German social security data By Nils Braakmann
  6. Education Policy and Crime By Lance Lochner
  7. Taxation of human capital and wage inequality: a cross-country analysis By Fatih Guvenen; Burhanettin Kuruscu; Serdar Ozkan
  8. Can Training Programs or Rather Wage Subsidies Bring the Unemployed Back to Work? A Theoretical and Empirical Investigation for Germany By Neubäumer, Renate
  9. New Technology, Human Capital and Growth in a Developing Country By Cuong Le Van; Tu-Anh Nguyen; Manh-Hung Nguyen; Thai Bao Luong
  10. The incidence and intensity of employer-provided By Andy Dickerson; Rob Wilson
  11. Economic and Productivity Growth Decomposition: An Application to Post-reform China By Kui-Wai Li; Tung Liu
  12. Human Capital and the Quality of Education in a Poverty Trap Model By Maria Emma Santos
  13. Searching for Jobs: Evidence from MBA Graduates By Kuhnen, Camelia M.
  14. Productivity and the density of human capital By Jaison R. Abel; Ishita Dey; Todd M. Gabe
  15. The Efficiency of Training and Hiring with Intra…firm Bargaining By Fabien Tripier
  16. The Nature of Credit Constraints and Human Capital By Lance J. Lochner; Alexander Monge-Naranjo
  17. Earnings Progression, Human Capital and Incentives: Theory and Evidence By Frederiksen, Anders
  18. The Labour Market Effects of Vocational Education and Training in Australia By Wang-Sheng Lee; Michael B. Coelli

  1. By: Kim, Yong Jin (Ajou University); Lee, Jong-Wha (Asian Development Bank)
    Abstract: This paper presents a theoretical model to analyze the effects of technology change on growth rates of income and human capital in the uncertain environments of technology. The uncertainty comes from two sources; the possibility of a technology advance and the characteristics of new technologies. We set up an overlapping generations model in which young agents invest in both width and depth of human capital in order to adopt new technologies. The model develops explicitly the micro-mechanism of the role of human capital in adopting new technologies as well as that of the process of human capital production in uncertain environments. In our model, a higher level for width of human capital relative to the level of depth leads one country to a higher growth path. We also show that an economy can have different growth paths depending on the initial structure of human capital and the uncertainty about the nature of new technologies. In particular, new technologies with more uncertain characteristics may adversely affect human capital accumulation and income growth, leading the economy to a low growth trap.
    Keywords: education; endogenous growth; human capital; technology adoption
    JEL: J24 O33
    Date: 2009–03
  2. By: Michel Beine (University of Luxemburg and CES-Ifo); Frédéric Docquier (FNRS and IRES, Université Catholique de Louvain); Hillel Rapoport (Department of Economics, Bar-Ilan University, EQUIPPE (Universités de Lille) Université Catholique de Louvain, CReAM and CEPREMAP.)
    Abstract: Recent theoretical studies suggest that migration prospects can raise the expected return to human capital and thus foster education investment at home or, in other words, induce a brain gain. In a recent paper (Beine, Docquier and Rapoport, Economic Journal, 2008) we used the Docquier and Marfouk (2006) data set on emigration rates by education level to examine the impact of brain drain migration on gross (pre-migration) human capital formation in developing countries. We found a positive e¤ect of skilled migration prospects on human capital growth in a cross-section of 127 developing countries, with an elasticity of about 5 percent. In this paper we assess the robustness of our results to the use of alternative brain drain measures, de…nitions of human capital, and functional forms. We …nd that the results hold using the Beine et al. (2007) alternative brain drain measures controlling for whether migrants acquired their skills in the home or in the host country. We also regress other indicators of human capital investment on skilled migration rates and …nd a positive e¤ect on youth literacy while the e¤ect on school enrolment depends on the exact speci…cation chosen.
    Date: 2009–07
  3. By: Florida, Richard (Martin Prosperity Institute); Mellander, Charlotta (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: The role of human capital in shaping cross-national economic performance is well-understood. But human capital is an indirect measure of skill, based on educational attainment. We introduce and test a more direct measure of skill, based on work that is actually performed, measured by occupation. Recent empirical studies have shown that such occupational “classes” play an important role in regional economic performance, out-performing human capital in some cases. We develop a measure of occupational skill and examine its relation to in cross-national economic performance. We explicitly compare this measure to conventional measures of human capital (based on educational attainment) through formal models of economic performance for 55 to 78 countries, using three measures of economic performance – economic output (GDP per capita), productivity (total factor productivity) and innovative performance (patents). The results confirm the hypothesis, indicating that our occupation-based measure closely is associated with all three measures of economic performance and also that it consistently performs better than human capital in these models.
    Keywords: skills; creativity; productivity; growth
    JEL: O31
    Date: 2010–02–11
  4. By: Darrell J. Glaser (United States Naval Academy); Ahmed S. Rahman (United States Naval Academy)
    Abstract: This paper explores the role of human capital on earnings and other measures of job performance during the late 19th century. During this time, U.S. Naval ocers belonged either to a regular or an engineer corps and had tasks assigned to their specialized training and experience. To test for the eects of specialized skills on performance, we compile educational data from original-source Naval Academy records for the graduating classes of 1858 to 1905. We merge these with career data extracted from official Navy registers for the years 1859 to 1907. This compilation comprises one of the longest and earliest longitudinal records of labor market earnings, education and experience of which we are aware. Our results suggest that greater technical skill translated into higher earnings early in careers, but wage premia diminished as careers progressed. From this evidence we argue that technical progress was more skill-depreciating than skill-biased during this period.
    Date: 2010–01
  5. By: Nils Braakmann (Institute of Economics, Leuphana University of Lüneburg, Germany)
    Abstract: This paper provides first evidence on the social returns to education from both firm-level and regional human capital. Using panel data from German social security, both at an individual and aggregated at the plant and regional level, I estimate earnings functions incorporating measures of regional and firm-level human capital while controlling for various types of unobserved heterogeneity, demand shocks, regional physical capital and other regional and firm-level confounders. The results suggest negligibly small external returns to the firm-level shares of high-skilled workers. On the regional level, the results show no support for external returns to education, except for skilled workers.
    Keywords: Human capital externalities, social returns to education, error-component model
    JEL: D62 J24 J31 R11
    Date: 2009–09
  6. By: Lance Lochner
    Abstract: This paper discusses the relationship between education and crime from an economic perspective, developing a human capital-based model that sheds light on key ways in which early childhood programs and policies that encourage schooling may affect both juvenile and adult crime. The paper first discusses evidence on the effects of educational attainment, school quality, and school enrollment on crime. Next, the paper discusses evidence on the crime reduction effects of preschool programs like Perry Preschool and Head Start, school-age programs that emphasize social and emotional development, and job training programs for low-skill adolescents and young adults. Finally, the paper concludes with a broad discussion of education policy and its potential role as a crime-fighting strategy.
    JEL: H23 I21 J24 K42
    Date: 2010–04
  7. By: Fatih Guvenen (Institute for Fiscal Studies and University of Rochester); Burhanettin Kuruscu; Serdar Ozkan
    Abstract: <p>Wage inequality has been significantly higher in the United States than in continental European countries (CEU) since the 1970s. Moreover, this inequality gap has further widened during this period as the US has experienced a large increase in wage inequality, whereas the CEU has seen only modest changes. This paper studies the role of labor income tax policies for understanding these facts. We begin by documenting two new empirical facts that link these inequality differences to tax policies. First, we show that countries with more progressive labor income tax schedules have significantly lower before-tax wage inequality at different points in time. Second, progressivity is also negatively correlated with the rise in wage inequality during this period. We then construct a life cycle model in which individuals decide each period whether to go to school, work, or be unemployed. Individuals can accumulate skills either in school or while working. Wage inequality arises from differences across individuals in their ability to learn new skills as well as from idiosyncratic shocks. Progressive taxation compresses the (after-tax) wage structure, thereby distorting the incentives to accumulate human capital, in turn reducing the cross-sectional dispersion of (before-tax) wages. We find that these policies can account for half of the difference between the US and the CEU in overall wage inequality and 76% of the difference in inequality at the upper end (log 90-50 differential). When this economy experiences skill-biased technological change, progressivity also dampens the rise in wage dispersion over time. The model explains 41% of the difference in the total rise in inequality and 58% of the difference at the upper end.</p>
    Keywords: Wage inequality, human capital, skill-biased technical change, tax policies
    Date: 2009–11
  8. By: Neubäumer, Renate (University of Koblenz-Landau)
    Abstract: Our paper investigates the relative effects of wage subsidies and further vocational training on the subsequent employment prospects of previously unemployed program participants. First, we outline a theoretical approach based on a firm's hiring decision. For the relative effectiveness of both labor market programs the assumption concerning the formation of human capital is crucial and leads to competing hypotheses for the medium and long term. On the assumption that wage subsidies have no effect on human capital they improve individuals’ employment prospects less than training programs. Contrariwise, on the assumption that the formation of human capital on subsidized jobs equals that by formal training subsidization has the same employment effect as a training program. Second, we test the two hypotheses empirically, using a large administrative data set from Germany and statistical matching techniques. Our treatment groups consist of unemployed persons taking up subsidized employment or entering a further vocational training program, respectively, during March 2003. To exclude unemployment after program end we estimate the effect of keeping a subsidized job versus participating in training and taking up a job immediately afterwards. The results strongly support the latter of our competing hypotheses: Previously subsidized individuals and trained individuals who found a job immediately afterwards have the same employment rates. This leads to the conclusion that firms value training on a subsidized job as much as formal training programs.
    Keywords: evaluation of active labor market programs, training programs, wage subsidies, propensity score matching
    JEL: J68 J64 J65
    Date: 2010–04
  9. By: Cuong Le Van (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, University of Exeter Business School - University of Exeter Business School); Tu-Anh Nguyen (Central Insitute of Economic Management - Central Insitute of Economic Management); Manh-Hung Nguyen (LERNA - INRA); Thai Bao Luong (National Economics University - National Economics University)
    Abstract: In a developing country with three sectors: consumption goods, new tech- nology, and education, the productivity of the consumption goods depends on a new technology and skilled labor used to produce this new technol- ogy. There can be three stages of economic growth. In the …rst stage the country concentrates on the production of consumption goods; in the second the country must import both physical capital and new technology capital to produce consumption goods and new technology; in the third the country must import capital and invest in the training and education of high skilled labor.
    Keywords: Optimal growth model; New technology capital; Human Capital; Developing country.
    Date: 2010
  10. By: Andy Dickerson (Department of Economics, The University of Sheffield Author-Person=pdi125); Rob Wilson
    Abstract: This paper examines the provision of training by employers and the participation in training by employees, conditional on employers´ training provision. Together these two dimensions of training determine its overall distribution in the workforce. The factors which affect employer training provision and employee training participation are considered simultaneously within an empirical model using data drawn primarily from the 2001 Employers Skill Survey. The results are consistent with high fixed costs but constant marginal costs of training provision, while also supporting many of the predictions regarding the relationship between training and workforce skills, skill-shortages, workplace and local labour market characteristics.
    Keywords: Training, Training incidence, Training intensity, Skill-shortages, Local labor markets
    JEL: J24 J31
    Date: 2009–06
  11. By: Kui-Wai Li (City University of Hong Kong, Hong Kong SAR); Tung Liu (Department of Economics, Ball State University)
    Abstract: This paper examines and applies the theoretical foundation of the decomposition of economic and productivity growth to the thirty provinces in China’s post-reform economy. The four attributes of economic growth are input growth, adjusted scale effect, technical progress, and efficiency growth. A stochastic frontier model with a translog production and incorporated with human capital is used to estimate the growth attributes in China. The empirical results show that input growth is the major contributor to economic growth and human capital is inadequate even though it has a positive and significant effect on growth. Technical progress is the main contributor to productivity growth and the scale effect has become important in recent years. The impact of technical inefficiency is statistical insignificant in the sample period. The relevant policy implication for a sustainable post-reform China economy is the need to promote human capital accumulation and improvement in technical efficiency.
    Keywords: technical progress, technical efficiency, economies of scale, human capital, China economy
    JEL: C2 D24 O4 O53
    Date: 2009–09
  12. By: Maria Emma Santos
    Abstract: This paper presents a model of a poverty trap that is caused by an unequal initial income and human capital distribution, and differences in the quality of education between children from the more and less advantaged social sectors. Under certain conditions, the economy converges to a situation with three stable and simultaneous equilibria, two of which constitute poverty traps, lowering the economy's current and steady-state aggregate output level as well as its growth rate. The model suggests that a policy oriented to equalizing the quality of education would, in the long run, have potential in reducing initial inequalities.
    Keywords: poverty trap, income distribution, quality of education, educational policy, equality of opportunity
    JEL: D31 O12 I21
    Date: 2009–08
  13. By: Kuhnen, Camelia M.
    Abstract: This paper proposes and tests empirically a model of optimal job search using novel data on job seeking strategies of participants in the labor market for MBA graduates. Theoretically and empirically I find that the breadth of search that workers conduct depends on their ability, outside option, and fit with available jobs, as well as on the exogenous job application cost and the ex-ante probability of applications resulting in offers. These results illustrate the formation of the supply of human capital available to hiring companies, which drives the efficiency of matching between workers and firms and ultimately determines productivity.
    Keywords: job search; matching; human capital; MBA education; career choice
    JEL: J44 J64 M51 J24 M12 G30
    Date: 2010–01–31
  14. By: Jaison R. Abel; Ishita Dey; Todd M. Gabe
    Abstract: We estimate a model of urban productivity in which the agglomeration effect of density is enhanced by a metropolitan area's stock of human capital. Estimation accounts for potential biases due to the endogeneity of density and industrial composition effects. Using new information on output per worker for U.S. metropolitan areas along with a measure of density that accounts for the spatial distribution of population, we find that a doubling of density increases productivity by 2 to 4 percent. Consistent with theories of learning and knowledge spillovers in cities, we demonstrate that the elasticity of average labor productivity with respect to density increases with human capital. Metropolitan areas with a human capital stock one standard deviation below the mean realize no productivity gain, while doubling density in metropolitan areas with a human capital stock one standard deviation above the mean yields productivity benefits that are about twice the average.
    Keywords: Urban economics ; Labor productivity ; Labor market ; Population ; Demography
    Date: 2010
  15. By: Fabien Tripier (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)
    Abstract: In a matching and intrafi…rm bargaining economy with constant return to scale production and matching technologies, large fi…rms hire and train workers efficiently. The efficiency of the competitive economy relies on the ability of large fi…rm to take into account the consequences of training on the wages bargained inside the fi…rm. This intrafi…rm bargaining process solves the hold-up problem that is associated with training costs that would otherwise lead to inefficient decisions of hiring and training.
    Date: 2010
  16. By: Lance J. Lochner (University of Western Ontario); Alexander Monge-Naranjo (Pennsylvania State University)
    Abstract: We develop a human capital model with borrowing constraints explicitly derived from government student loan programs and private lending under limited commitment. Two key implications of our analysis are: (i) binding constraints may not depress investment; and (ii) a positive relationship between investment and ability is unlikely to arise in standard exogenous constraint models but arises more generally in our framework. Our model also helps explain a number of important empirical observations in the U.S. higher education sector since the early 1980s: (i) a strong and stable positive correlation between ability and college attendance for all income and wealth backgrounds; (ii) the rising importance of family income as a determinant of college attendance; (iii) the increase in the share of undergraduates borrowing the maximum from government student loan programs; and (iv) the dramatic rise in student borrowing from private lenders. In our framework, all of these are natural responses to the rising costs and returns to college (with stable real government loan limits) observed in recent decades. In contrast, the standard exogenous constraint model cannot simultaneously explain observations (i) and (ii) under standard assumptions about preferences; it is also silent on the rise in private lending. Finally, by incorporating both public and private lending, our framework offers new insights regarding the interaction of government and private student lending as well as the responsiveness of private student credit to economic and policy changes.
    Date: 2010
  17. By: Frederiksen, Anders (Aarhus School of Business)
    Abstract: The career prospects of newly recruited employees differ substantially within an organization. The stars experience a considerable growth in earnings; others can hardly maintain their entry salaries. This article sheds light on the mechanisms generating the observed heterogeneity in earnings progression by investigating the effects of on-the-job human capital acquisition, explicit short-run incentives and career concern incentives on earnings progression. The model leads to predictions about the incentive structure and the progression in both cross-sectional and individual earnings which are supported by the empirical analysis based on personnel records from a large bank.
    Keywords: explicit incentives, career concern incentives, performance, earnings dynamics, personnel economics
    JEL: J30 J41 M50
    Date: 2010–04
  18. By: Wang-Sheng Lee (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Michael B. Coelli (Department of Economics, The University of Melbourne)
    Abstract: We provide estimates of the effects of completing a Vocational Education and Training (VET) qualification on several labour market outcomes: earnings from employment, plus the probabilities of being employed, being employed full-time if employed, and being employed in a permanent position. Estimates are provided for 1993, 1997, 2001 and 2005. The estimation methodology is based on matched comparisons of persons at each level of VET qualifications separately with Year 12 completers and non-completers. We find that compared to Year 12 completers, there is little benefit from obtaining certificate level qualifications, but there are positive employment and earnings outcomes associated with obtaining diploma level qualifications. Compared to non-completers of Year 12, however, there are benefits from obtaining any kind of VET qualification, including the lower level Certificate I/II qualifications.
    Date: 2010–01

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