nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2010‒07‒03
six papers chosen by
Fabio Sabatini
Euricse and University of Trento

  1. Economic Freedom, Human Rights, and the Returns to Human Capital: An Evaluation of the Schultz Hypothesis By King, Elizabeth M.; Montenegro, Claudio E.; Orazem, Peter
  2. Are educational mismatches responsible for the ‘inequality increasing effect’ of education? By Budria, Santiago
  3. Demographic Change, Human Capital and Welfare By Alexander Ludwig; Thomas Schelkle; Edgar Vogel
  4. Crucial contributors? Re-examining labour market impact and workplace-training intensity in Canadian trades apprenticeship By Meredith, John
  5. Financial Constraints, Endogenous Educational Choices and Self-Selection of Migrants By Juliano Assuncao; Leandro Carvalho
  6. Education and Family Background: Mechanisms and Policies By Björklund, Anders; Salvanes, Kjell G.

  1. By: King, Elizabeth M.; Montenegro, Claudio E.; Orazem, Peter
    Abstract:   T.W. Schultz (1975) proposed that returns to human capital were highest in economic environments where technology, price or production shocks were common and managerial skills to adapt resource allocations to those shocks were most in need.  We hypothesize that variation in returns to human capital across developing countries can be explained in part by government institutions that blunt the magnitude of those shocks or that limit individual abilities to respond to those shocks.  Using estimated returns to schooling and experience from 122 household surveys from 86 developing countries, we demonstrate a strong positive correlation between economic freedom and returns to human capital. The positive effect is observed at all quantiles of the wage distribution.  Economic freedom benefits the most skilled who get higher returns to schooling; but it also benefits the least skilled who get higher returns from experience.  
    Keywords: Returns to education; Returns to experience; Economic freedom; inequality; quantiles
    JEL: J31 O15 P10
    Date: 2010–06–22
  2. By: Budria, Santiago
    Abstract: This paper asks whether educational mismatches can account for the positive association between education and wage inequality found in the data. We use two different data sources, the European Community Household Panel and the Portuguese Labour Force Survey, and consider several types of mismatch, including overqualification, underqualification and skills mismatch. We test our hypothesis using two different measurement methods, the ‘statistical’ and the ‘subjective’ approach. The results are robust to the different choices and unambiguously show that the positive effect of education on wage inequality is not due to the prevalence of educational mismatches in the labour market.
    Keywords: Overeducation; returns to education; educational mismatch; within-groups wage inequality
    JEL: D31 J31
    Date: 2010–06–01
  3. By: Alexander Ludwig; Thomas Schelkle; Edgar Vogel (Mannheim Research Institute for the Economics of Aging (MEA))
    Abstract: This paper employs a large scale overlapping generations (OLG) model with endogenous human capital formation using a Ben-Porath (1967) technology to evaluate the quantitative role of human capital adjustments for the economic consequences of demographic change. We find that endogenous human capital formation is a quantitatively important adjustment mechanism which substantially mitigates the macroeconomic impact of population aging. On the aggregate level, the predicted decrease of the rate of return to physical capital is only one third of the predicted decrease in a standard model with a fixed human capital profile. In terms of welfare, while young agents with little assets gain up to 0.8% in consumption from increasing wages in both models, welfare losses from decreasing returns of older and asset rich households are substantial. But importantly, these losses are about 50 − 70% higher in the model without endogenous human capital formation. Ignoring this adjustment channel thus leads to quantitatively important biases of the welfare assessment of demographic change. We also document that not reforming the social security system but letting contribution rates increase will largely offset any positive welfare effects for future generations.
    JEL: C68 E17 E25 J11 J24
    Date: 2010–01–15
  4. By: Meredith, John
    Abstract: Canadian apprenticeship policy has recently turned to direct subsidies for participants, including a federal tax incentive for employers. Some assumptions underlying the employer subsidy are: that apprenticeship training is a principal contributor to the skilled trades labour supply; that employers of apprentices typically incur high training cost and risks; and that in the absence of offsetting incentives, these would deter their participation. These assumptions are tested, using an analysis of 2006 census data and a series of 33 employer interviews. The census data reveal that, in 74 “skilled trades†occupations (NOC-S group H), the proportion of the labour force reporting an apprenticeship credential is 37%. When certificates granted to “trade qualifiers†are excluded from the total, registered apprenticeship certification is found to contribute roughly 25% of the skilled trades labour supply. A closer examination of the census data reveals strong inter-occupational differences in the certification rate and in the ratio of certified to less-than-certified workers, suggesting a de facto hierarchy of trades occupations. The interviews reveal sharp variations in employers’ workplace training efforts, challenging the twin suppositions that employers of apprentices are uniformly high contributors to skill formation, and that high training-related costs risks generally deter their participation. Differences in training behaviour are attributed to high-skill versus low-skill business strategies that in turn reflect differing product markets and regulatory constraints. Whatever the level of their training effort, all of the participating employers are able to minimize the training-related risks that have been cited as the principal rationale for employer subsidies. The paper argues for a more nuanced approach to skills policy and research in Canada, with greater attention to the diversity of actors’ strategic interactions with the training system.
    Keywords: Apprenticeship, Skill, Trades, Training, Labour Supply, Canada
    JEL: J21 J23 J24 L23 L88 Z13
    Date: 2010–06–22
  5. By: Juliano Assuncao; Leandro Carvalho
    Abstract: The Roy model predicts that migrants will be disproportionately drawn from the lower half of the educational distribution of the sending country if the sending country has a higher return to schooling. However, Mexican immigrants in the U.S. tend to be disproportionately drawn from the middle of the distribution. This paper argues that financial constraints may explain why. It studies migrants' selectivity when agents that face credit constraints make joint decisions about how much to invest in education and whether to migrate. The results show that financial constraints can explain the intermediate selection of migrants observed in the data.
    Keywords: migration, financial constraints, self-selection, human capital
    JEL: O15 O16 R23
    Date: 2010–05
  6. By: Björklund, Anders (SOFI, Stockholm University); Salvanes, Kjell G. (Norwegian School of Economics and Business Administration)
    Abstract: In every society for which we have data, people’s educational achievement is positively correlated with their parents’ education or with other indicators of their parents’ socioeconomic status. This topic is central in social science, and there is no doubt that research has intensified during recent decades, not least thanks to better data having become accessible to researchers. The purpose of this chapter is to summarize and evaluate recent empirical research on education and family background. Broadly speaking, we focus on two related but distinct motivations for this topic. The first is equality of opportunity. Here, major the research issues are: How important a determinant of educational attainment is family background, and is family background – in the broad sense that incorporates factors not chosen by the individual – a major, or only a minor, determinant of educational attainment? What are the mechanisms that make family background important? Have specific policy reforms been successful in reducing the impact of family background on educational achievement? The second common starting point for recent research has been the child development perspective. Here, the focus is on how human-capital accumulation is affected by early childhood resources. Studies with this focus address the questions: what types of parental resources or inputs are important for children's development, why are they important and when are they important? In addition, this literature focuses on exploring which types of economic policy, and what timing of the policy in relation to children's social and cognitive development, are conducive to children's performance and adult outcomes. The policy interest in this research is whether policies that change parents' resources and restrictions have causal effects on their children.
    Keywords: intergenerational mobility, sibling correlations, education, education reform
    JEL: I21 J13 J24
    Date: 2010–06

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