nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2010‒10‒09
ten papers chosen by
Fabio Sabatini

  1. China's Overt Economic Rise and Latent Human Capital Investment: Achieving Milestones and Competing for the Top By Constant, Amelie F.; Tien, Bienvenue; Zimmermann, Klaus F.; Meng, Jingzhou
  2. Human Capital and Population Growth in Non-Metropolitan U.S. Counties: The Importance of College Student Migration By Winters, John V
  3. The life cycle of early skill formation. By Tominey, E.
  4. Human Capital, Endogenous Information Acquisition,and Home Bias in Financial Markets By Isaac Ehrlich; Jong Kook Shin; Yong Yin
  5. Catalyzers for Social Insurance: Education Subsidies vs. Real Capital Taxation By Dirk Schindler; Hongyan Yang
  6. Why do low-educated workers invest less in further training? By Fouarge Didier; Schils Trudie; Grip Andries de
  7. ICT4D and the Human Development and Capability Approach: The Potentials of Information and Communication Technology By Jean-Yves Hamel
  8. Endogenous Credit Constraints, Human Capital Investment and Optimal Tax Policy By Hongyan Yang
  9. Skill-Biased Change in Entrepreneurial Technology By Poschke, Markus
  10. Determinants of Human Development: Insights from State-Dependent Panel Models By Michael Binder; Georgios Georgiadis

  1. By: Constant, Amelie F. (DIW DC, George Washington University); Tien, Bienvenue (DIW DC); Zimmermann, Klaus F. (IZA, DIW Berlin and Bonn University); Meng, Jingzhou (George Washington University)
    Abstract: We provide an overview of China's economic rise through time. Over the past decade, China has maintained 10% growth in GDP, albeit with a GDP per capita at the low level of a developing country. Its tremendous economic development has overlooked the growing social inequalities and rising resentments of the ‘cheap’ workers and those laid off. The main contributor to its ascension is international trade and investment in physical capital, often at the expense of the environment. The year 1978 was the landmark for the foundation of the Chinese modern higher education system. Since then the number of students enrolled in Chinese higher education institutions has increased dramatically; China is producing serious scholars and a tremendous amount of scholarly output; more and more Chinese students seek higher education abroad; and international students find a rising interest in receiving education in China.
    Keywords: China, human capital, brain drain, higher education
    JEL: F22 J24 N35 O15 O24 O53
    Date: 2010–09
  2. By: Winters, John V
    Abstract: Researchers have consistently shown that the stock of human capital in an area, measured as the share of the adult population with a college degree, is a strong predictor of future population growth. This paper examines this relationship for U.S. non-metropolitan counties and posits that student migration for higher education may play an important role. Students often move to an area for college and then stay in the area after their education is complete, causing the area’s educated population to grow. Empirical evidence suggests that student migration explains nearly all of the greater in-migration to highly educated non-metropolitan counties. Implications for non-metropolitan brain drain are discussed.
    Keywords: population growth; migration; human capital; non-metropolitan counties; college
    JEL: R11 R23
    Date: 2010–10–01
  3. By: Tominey, E.
    Abstract: This thesis focuses on two dimensions of the child production function - the technology of human capital formation and the role of speci…fic family inputs into human capital. The …first two chapters explore the technology by which inputs produce child human capital. Speci…fically, for given parental lifetime income, these ask whether the timing of income matters for later outcomes of the children. Two methodologies estimate the effect at different margins. Firstly in a fully flexible model, the relationship between parental income at child ages 0-5, 6-11 and 12-17 and subsequent child outcomes is estimated nonparametrically, allowing for complementarity across periods. Income aged 0-5 is as important in general as income at age 6-11 for child human capital formation. Complementarities exist between 0-5 and 6-11 for households with low permanent income, which are those likely to be credit constrained. Similarly, very strong complementarities are found between early years income and income during adolescence (age 12-17) for the group of poor parents. Chapter 3 analyses the role of permanent and transitory income shocks at different ages, upon adolescent human capital. Empirical results suggest the effect of permanent shocks declines across age. This is intuitive, given that a permanent shock changes household wealth and hence a shock at age 1 drives more future income realisations than a later shock. Transitory shocks on the other hand, have an increasing effect upon child outcomes across child age. Further, there is evidence of intrahousehold insurance against paternal transitory income shocks. The fi…nal two chapters of the thesis look at parental inputs in the production function. Chapter 4 allows the life cycle of skill formation to begin pre-birth, by estimating the role of maternal smoking during pregnancy upon birth outcomes. Results suggest a large proportion of the correlation is explained by a maternal fi…xed effect. Finally, chapter 5 offers a cross country comparison of the similarities in child test score gaps, by a range of measures of family inequality. Despite wide institutional differences, this chapter estimates homogeneous correlates for maternal education, family size and child gender upon child achievement, but differences in the covariates of lone parenthood and ethnicity.
    Date: 2010–08–28
  4. By: Isaac Ehrlich (State University of New York at Buffalo and National Bureau of Economic Research and Hong Kong Institute for Monetary Research); Jong Kook Shin (State University of New York at Buffalo); Yong Yin (State University of New York at Buffalo)
    Abstract: Considerable attention has been devoted in the financial literature to excessive portfolio concentrations in domestic risky assets relative to those predicted by standard finance models-generally identified as"home bias"-across international markets. The innovation we offer is ascribing home bias to endogenous information acquisition, or"asset management"(see EHY 2008), resulting from variations in human capital endowments. We develop discriminating hypotheses about the roles of"specific" and"general"human capital endowments and the direct and opportunity costs of asset management in determining how home bias varies among individual investors and across financial markets. Our model also provides insights concerning differences across countries in the degree to which their domestic asset prices are"information revealing".These hypotheses are tested against 8 national probability samples of individual portfolio compositions in the US over 1992-2007, and 7 international samples over 2001-2007 including 23 countries. The findings are consistent with our hypotheses.
    JEL: D82 F30 G11 G12 G15 J24
    Date: 2010–07
  5. By: Dirk Schindler (Department of Economics, University of Konstanz, Germany); Hongyan Yang (Department of Economics, University of Konstanz, Germany)
    Abstract: To analyze the optimal social insurance package, we set up a two-period life-cycle model with risky human capital investment, where the government has access to labor taxation, education subsidies and capital taxation. Social insurance is provided by redistributive labor taxation. Moreover, both education subsidies and capital taxation are used as catalyzers to facilitate social insurance by mitigating distortions from labor taxation. We derive a Ramsey-rule for the optimal combination of these two instruments. Relative to capital taxation, optimal education subsidies increase in their relative effectiveness to boost labor supply and in households' underinvestment into education, but they decrease in their relative net distortions. For their absolute levels, indirect complementarity effects, i.e., influencing the effectiveness of the other instrument, do matter. Generally, a decrease in capital taxes should go along with an increase in education subsidies.
    Keywords: Human Capital Investment, Education Subsidies, Capital Taxation, Risk, Social Insurance
    JEL: H21 I2 J2 D80
    Date: 2010–09–30
  6. By: Fouarge Didier; Schils Trudie; Grip Andries de (ROA rm)
    Abstract: Several studies document the fact that low-educated workers participate less often infurther training than high-educated workers. The economic literature suggests thatthere is no significant difference in employer willingness to train low-educated workers,which leaves the question of why the low educated invest less in training unanswered.This paper investigates two possible explanations: Low-educated workers invest less intraining because of 1) the lower economic returns to these investments or 2) their lowerwillingness to participate in training. Controlling for unobserved heterogeneity that canaffect the probability of enrolling into training, we find that the economic returns totraining for low-educated workers are positive and not significantly different from thosefor high-educated workers. However, low-educated workers are significantly less willingto participate in training. This lesser willingness to participate in training is driven byeconomic preferences (future orientation, preference for leisure), as well as personalitytraits (locus of control, exam anxiety, and openness to experience).
    Keywords: education, training and the labour market;
    Date: 2010
  7. By: Jean-Yves Hamel (Human Development Report Office of the United Nations Development Programme)
    Abstract: This study frames a review of information and communication technology for development (ICT4D) within the human development and capabilities approach. Looking at the basic dimensions of human development, which make up the core measurement of its achievements: health, education and a income, and additionally at the dimensions of participation and empowerment, a survey of research and evidence seeks to evaluate whether or not ICTs have demonstrated positive outcomes for these dimensions of human development and more broadly to the practice of its approach. The paper reviews the literature and research conducted in these dimensions in order to establish a sense of the scope and potential that ICTs have for human development. By doing so, the paper seeks to assess whether or not the use of ICTs is pertinent to the human development of the poor, and if so, which are documented cases and outcomes that can perhaps be replicated in differing development contexts. The paper also seeks to answer questions on the role of government policy and investment in ICTs as keys to their success in development and whether or not ICTs should be emphasized at all in poor countries. The paper concludes with the important realisation that ICTs alone cannot improve peoplesÕ lives; the use of ICTs needs to occur within broader strategies that are tailored to make the most use of these tools and techniques in order to reap their potential benefits for human development.
    Keywords: human development, information and communication technology, ICT4D, telecommunications reform, empowerment, participation.
    JEL: D1 I0 O3 O15 Z1
    Date: 2010–09
  8. By: Hongyan Yang (Department of Economics, University of Konstanz, Germany)
    Abstract: This paper employs a two-period life-cycle model to derive the optimal tax policy when educational investments are subject to credit constraints. Credit constraints arise from the limited commitment of debitors to repay loans and are endogenously determined by private banks under the non-default condition that individuals can-not be better off by defaulting. We show that the optimal redistributive taxation trades the welfare gain of reducing borrowing demand and of changing the credit constraints against the efficiency costs of distorting education and labor supply. In addition, we compare the optimal taxation with that when credit constraints are taken as given. If income taxation decreases (increases) the borrowing limit, taking credit constraints as given leads to a too high (low) labor tax rate. Thus, ignoring the effects of tax policy on credit constraints overestimates (underestimates) the welfare effects of income taxation. Numerical examples show that income taxation tightens the credit constraints and the optimal tax rates are lower when credit constrains are endogenized. The intuition is that redistributive taxation reduces the incentive to invest in education and to work, thus exaggerating the moral hazard problems associated with credit constraints.
    Keywords: labor taxation, human capital investment, credit constraints
    JEL: H21 I2 J2
    Date: 2010–09–30
  9. By: Poschke, Markus (McGill University)
    Abstract: In contrast to the very large literature on skill-biased technical change among workers, there is hardly any work on the importance of skills for the entrepreneurs who employ those workers, and in particular on their evolution over time. This paper proposes a simple theory of skill-biased change in entrepreneurial technology that fits with cross-country, historical and micro evidence. For this, it introduces two additional features into an otherwise standard occupational choice, heterogeneous firm model à la Lucas (1978): technological change does not benefit all potential entrepreneurs equally, and there is a positive relationship between an individual's potential payoffs in working and in entrepreneurship. If some firms consistently benefit more from technological progress than others, they stay closer to the frontier, and the others fall behind. Because wages rise for all workers, low-productivity entrepreneurs will then at some point exit and become workers. As a consequence, the entrepreneurship rate falls with income per capita, average firm size and firm size dispersion increase with income per capita, and "entrepreneurship out of necessity" falls with income per capita. The paper also documents, for two of the facts for the first time, that these are exactly the relationships prevailing in cross-country data. Quantitatively, the model fits the U.S. experience well. Using the parameters from a calibration to the U.S., the model also explains cross-country patterns quite well.
    Keywords: occupational choice, entrepreneurship, firm size, firm entry, growth, skill-biased technical change
    JEL: E24 J24 L11 L26 O30
    Date: 2010–09
  10. By: Michael Binder (Graduate School of Economics, Finance, and Management at Goethe University, Johannes Gutenberg University Mainz and Technical University Darmstadt and the Center for Financial Studies); Georgios Georgiadis (Graduate School of Economics, Finance, and Management at Goethe University, Johannes Gutenberg University Mainz and Technical University Darmstadt)
    Abstract: In this paper, we study economic development in a panel of 84 countries from 1970 to 2005. We focus on characterizing heterogeneities in the development effects of macroeconomic policies and on comparing the development process as measured by GDP to that measured by the Human Development Index (HDI). We do so within a novel dynamic panel modelling framework that can account for crucial aspects of both the cross-sectional and intertemporal features of the observed process of economic development, and that can capture the dependence of the development effects of macroeconomic policies on differences in countries' persistent characteristics, such as their social norms and institutions. Among our findings are that macroeconomic policies affect economic development with less delay than suggested by conventional econometric frameworks, yet impact HDI with longer delay and overall less strongly than GDP. Differences in countries' persistent characteristics may even affect the sign of the long-run development effects of a given macroeconomic policy: Fiscal stimuli in the form of government consumption positively affect GDP in countries with low institutional quality, but negatively affect long-run GDP in countries with high institutional quality.
    Keywords: human development, institutions and social norms, dynamic panel modelling.
    JEL: C23 O10 O15
    Date: 2010–09

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