Showing papers on "Human capital published in 1999"
TL;DR: This article showed that the differences in capital accumulation, productivity, and therefore output per worker are driven by differences in institutions and government policies, which are referred to as social infrastructure and called social infrastructure as endogenous, determined historically by location and other factors captured by language.
Abstract: Output per worker varies enormously across countries. Why? On an accounting basis our analysis shows that differences in physical capital and educational attainment can only partially explain the variation in output per worker—we find a large amount of variation in the level of the Solow residual across countries. At a deeper level, we document that the differences in capital accumulation, productivity, and therefore output per worker are driven by differences in institutions and government policies, which we call social infrastructure. We treat social infrastructure as endogenous, determined historically by location and other factors captured in part by language. In 1988 output per worker in the United States was more than 35 times higher than output per worker in Niger. In just over ten days the average worker in the United States produced as much as an average worker in Niger produced in an entire year. Explaining such vast differences in economic performance is one of the fundamental challenges of economics. Analysis based on an aggregate production function provides some insight into these differences, an approach taken by Mankiw, Romer, and Weil [1992] and Dougherty and Jorgenson [1996], among others. Differences among countries can be attributed to differences in human capital, physical capital, and productivity. Building on their analysis, our results suggest that differences in each element of the production function are important. In particular, however, our results emphasize the key role played by productivity. For example, consider the 35-fold difference in output per worker between the United States and Niger. Different capital intensities in the two countries contributed a factor of 1.5 to the income differences, while different levels of educational attainment contributed a factor of 3.1. The remaining difference—a factor of 7.7—remains as the productivity residual. * A previous version of this paper was circulated under the title ‘‘The Productivity of Nations.’’ This research was supported by the Center for Economic Policy Research at Stanford and by the National Science Foundation under grants SBR-9410039 (Hall) and SBR-9510916 (Jones) and is part of the National Bureau of Economic Research’s program on Economic Fluctuations and Growth. We thank Bobby Sinclair for excellent research assistance and colleagues too numerous to list for an outpouring of helpful commentary. Data used in the paper are available online from http://www.stanford.edu/,chadj.
6,454 citations
TL;DR: In this article, the authors draw on the resource-based view of the firm, human capital theory, and transaction cost economics to develop a human resource architecture of four different employment modes: internal development, acquisition, contracting, and alliance.
Abstract: Recognizing, that not all employees possess knowledge and skills that are of equal strategic importance, we draw on the resource-based view of the firm, human capital theory, and transaction cost economics to develop a human resource architecture of four different employment modes: internal development, acquisition, contracting, and alliance. We use this architecture to derive research questions for studying the relationships among employment modes, employment relationships, human resource configurations, and criteria for competitive advantage.
2,550 citations
TL;DR: In this paper, the authors studied how a person's concern for a future career may influence his or her incentives to put in effort or make decisions on the job, and showed that career motives can be beneficial as well as detrimental, depending on how well the two kinds of capital returns are aligned.
Abstract: The paper studies how a person's concern for a future career may influence his or her incentives to put in effort or make decisions on the job. In the model, the person's productive abilities are revealed over time through observations of performance. There are no explicit output-contingent contracts, but since the wage in each period is based on expected output and expected output depends on assessed ability, an "implicit contract" links today's performance to future wages. An incentive problem arises from the person's ability and desire to influence the learning process, and therefore the wage process, by taking unobserved actions that affect today's performance. The fundamental incongruity in preferences is between the individual's concern for human capital returns and the firm's concern for financial returns. The two need be only weakly related. It is shown that career motives can be beneficial as well as detrimental, depending on how well the two kinds of capital returns are aligned. It is well understood by now that informational externalities may place special demands on the organization of economic exchange. Simple price-mediated markets will frequently fail in the presence of asymmetric information. In that case more elaborate contractual arrangements have to be used as substitutes for the price system. Lately, considerable effort has been devoted to the analysis of contracting under incomplete information with the objective to understand the range of economic institutions that emerge in response to the failure of the price system. The analysis of moral hazard has played a prominent role in this development.' Moral hazard problems arise when, for some reason or another, transacting parties cannot contract contingent on the delivery of the good. For instance, in buying labour services it may be that the amount of labour supplied is not directly observable, precluding a simple exchange of wage for labour. As a partial remedy to this problem, an imperfect, mutually observed signal about the supply of labour can be used as a proxy in the contract. Frequently, output is taken as such a proxy. The drawback is that output is often influenced by other factors than labour input, which induce undesirable risk into the contract. One is therefore faced with a tradeoff between allocating risk associated with incomplete observability and providing incentives for a proper supply of labour. Gaining insight into this tradeoff is important not only for understanding contracting in the small (e.g. managerial incentive schemes), but also because it is closely related to the fundamental tension between equity and efficiency in the society as a whole. While our understanding of moral hazard has advanced a lot in past years, it is clear that much work remains. An important question that has received little attention until
2,046 citations
Posted Content•
TL;DR: The authors summarizes recent research in economics that investigates differentials by race and gender in the labor market, including recent extensions of taste-based theories, theories of occupational exclusion, and theories of statistical discrimination.
Abstract: This chapter summarizes recent research in economics that investigates differentials by race and gender in the labor market. We start with a statistical overview of the trends in labor market outcomes by race, gender and Hispanic origin, including some simple regressions on the determinants of wages and employment. This is followed in Section 3 by an extended review of current theories about discrimination in the labor market, including recent extensions of taste-based theories, theories of occupational exclusion, and theories of statistical discrimination. Section 4 discusses empirical research that provides direct evidence of discrimination in the labor market, beyond "unexplained gaps" in wage or employment regressions. The remainder of the chapter reviews the evidence on race and gender gaps, particularly wage gaps. Section 5 reviews research on the impact of pre-market human capital differences in education and family background that differ by race and gender. Section 6 reviews the impact of differences in both the levels and the returns to experience and seniority, with discussion of the role of training and labor market search and turnover on race and gender differentials. Section 7 reviews the role of job characteristics (particularly occupational characteristics) in the gender wage gap. Section 8 reviews the smaller literature on differences in fringe benefits by gender. Section 9 is an extensive discussion of the empirical work that accounts for changes in the trends in race and gender differentials over time. Of particular interest is the new research literature that investigates the impact of widening wage inequality on race and gender wage gaps. Section 10 reviews research that relates policy changes to race and gender differentials, including anti-discrimination policy. The chapter concludes with comments about a future research agenda.
1,717 citations
30 Sep 1999
TL;DR: In this article, the authors provide an account of the current understanding of social capital in both theoretical and empirical studies, and the concept is debated throughout the literature, including the classic article by the late James Coleman.
Abstract: This book provides an account of the current understanding of social capital. It covers both theoretical and empirical studies, and the concept is debated throughout. Also included in this volume is the classic 1987 article by the late James Coleman, Social Capital in the Creation of Human Capital, which formed the basis for the development of social capital as an organizing concept in the social sciences. The volume is divided into areas that cover the analytical foundations and institutional and statistical analyses of social capital.
1,350 citations
Posted Content•
TL;DR: The authors studied how a person's concern for a future career may influence his or her incentives to put in effort or make decisions on the job, and found that career motives can be beneficial as well as detrimental, depending on how well the two kinds of capital returns are aligned.
Abstract: The paper studies how a person's concern for a future career may influence his or her incentives to put in effort or make decisions on the job. In the model, the person's productive abilities are revealed over time through observations of performance. There are no explicit output contingent contracts, but since the wage in each period is based on expected output and expected output depends on assessed ability, an implicit contact' links today's performance to future wages. An incentive problem arises from the person's ability and desire to influence the learning process, and therefore the wage process, by taking unobserved actions that affect today's performance. The fundamental incongruity in preferences is between the individual's concern for human capital returns and the firm's concern for financial returns. The two need to be only weakly related. It is shown that career motives can be beneficial as well as detrimental, depending on how well the two kinds of capital returns are aligned.
1,344 citations
TL;DR: For example, this paper found no association between increases in human capital attributable to the rising educational attainment of the labor force and the rate of growth of output per worker and showed that the association of educational capital growth with conventional measures of total factor production is large, strongly statistically significant and negative.
Abstract: Cross-national data show no association between increases in human capital attributable to the rising educational attainment of the labor force and the rate of growth of output per worker. This implies that the association of educational capital growth with conventional measures of total factor production is large, strongly statistically significant, and negative. These are 'on average' results, derived from imposing a constant coefficient. However, the development impact of education varied widely across countries and has fallen short of expectations for three possible reasons. First, the institutional/governance environment could have been sufficiently perverse that the accumulation of educational capital lowered economic growth. Second, marginal returns to education could have fallen rapidly as the supply of educated labor expanded while demand remained stagnant. Third, educational quality could have been so low that years of schooling created no human capital. The extent and mix of these three phenomena vary from country to country in explaining the actual economic impact of education, or the lack thereof.
1,199 citations
Posted Content•
TL;DR: The authors summarizes recent research in economics that investigates differentials by race and gender in the labor market, including recent extensions of taste-based theories, theories of occupational exclusion, and theories of statistical discrimination.
Abstract: This chapter summarizes recent research in economics that investigates differentials by race and gender in the labor market. We start with a statistical overview of the trends in labor market outcomes by race, gender and Hispanic origin, including some simple regressions on the determinants of wages and employment. This is followed in Section 3 by an extended review of current theories about discrimination in the labor market, including recent extensions of taste-based theories, theories of occupational exclusion, and theories of statistical discrimination. Section 4 discusses empirical research that provides direct evidence of discrimination in the labor market, beyond "unexplained gaps" in wage or employment regressions. The remainder of the chapter reviews the evidence on race and gender gaps, particularly wage gaps. Section 5 reviews research on the impact of pre-market human capital differences in education and family background that differ by race and gender. Section 6 reviews the impact of differences in both the levels and the returns to experience and seniority, with discussion of the role of training and labor market search and turnover on race and gender differentials. Section 7 reviews the role of job characteristics (particularly occupational characteristics) in the gender wage gap. Section 8 reviews the smaller literature on differences in fringe benefits by gender. Section 9 is an extensive discussion of the empirical work that accounts for changes in the trends in race and gender differentials over time. Of particular interest is the new research literature that investigates the impact of widening wage inequality on race and gender wage gaps. Section 10 reviews research that relates policy changes to race and gender differentials, including anti-discrimination policy. The chapter concludes with comments about a future research agenda.
1,131 citations
TL;DR: This article examined the characteristics of core state economic agencies and the growth records of a sample of 35 developing countries for the 1970-1990 period and found that these Weberian characteristics significantly enhance prospects for economic growth, even when they control for initial levels of GDP per capita and human capital.
Abstract: The role of bureaucratic authority structures in facilitating economic growth has been a sociological concern since Max Weber's classic contributions almost 100 years ago. Using a recent and original data set, we examine the characteristics of core state economic agencies and the growth records of a sample of 35 developing countries for the 1970-1990 period. Our "Weberianness Scale" offers a simple measure of the degree to which these agencies employ meritocratic recruitment and offer predictable, rewarding long-term careers. We find that these "Weberian " characteristics significantly enhance prospects for economic growth, even when we control for initial levels of GDP per capita and human capital. Our results imply that "Weberianness" should be included as a factor in general models of economic growth. They also suggest the need for more attention by policymakers to building better bureaucracies and more research by social scientists on variations in how state bureaucracies are organized.
1,032 citations
TL;DR: In the human capital model with perfect labor markets, firms never invest in general skills and all cost of general training are borne by workers as mentioned in this paper. But when lobor market frictions compress the structure of the labor market, the costs of general skills are increased.
Abstract: In the human capital model with perfect labor markets, firms never invest in general skills and all cost of general training are borne by workers. When lobor market frictions compress the structure...
1,021 citations
Book•
15 Feb 1999
TL;DR: Rodrik as discussed by the authors argues that successful integration into the world economy requires a complementary set of policies and institutions at home Policy makers must reinforce their external strategy of liberalization with an internal strategy that gives the state substantial responsibility in building physical and human capital and mediating social conflicts.
Abstract: Policy makers in the developing world are grappling with new dilemmas created by openness to trade and capital flows What role, if any, remains for the state in promoting industrialization? Does openness worsen inequality, and if so, what can be done about it? What is the best way to handle turbulence from the world economy, especially the fickleness of international capital flows? In The New Global Economy and Developing Countries Dani Rodrik argues that successful integration into the world economy requires a complementary set of policies and institutions at home Policy makers must reinforce their external strategy of liberalization with an internal strategy that gives the state substantial responsibility in building physical and human capital and mediating social conflicts
TL;DR: In this article, the authors explore how urbanization affects efficiency of the growth process and how growth affects patterns of urbanization in an economy experiencing endogenous economic growth and exogenous population growth.
Abstract: In an economy experiencing endogenous economic growth and exogenous population growth, we explore two main themes: how urbanization affects efficiency of the growth process and how growth affects patterns of urbanization. Localized information spillovers promote agglomeration and human capital accumulation fosters endogenous growth. Individual city sizes grow with local human capital accumulation and knowledge spillovers; and city numbers generally increase, which we demonstrate is consistent with empirical evidence. We analyze whether local governments can successfully internalize local dynamic externalities. In addition, we explore how growth involves real income differences across city types and how urbanization can foster income inequality. Most nonagricultural production in developed countries occurs in metropolitan areas. The underlying reasons why economic activity agglomerates into cities—localized information and knowledge spillover—also make cities the engines of economic growth in an We gratefully acknowledge support of the National Science Foundation (grants SBR 9422440 and SBR9730142) for this research. The work has benefited from conversations with Harl Ryder on the dynamics of the model and from comments by Gilles Duranton and participants in seminars at Brown, Colorado, and Texas, Austin and a presentation at an ISIT Seminar sponsored by the Centre for Economic Policy Research and the National Bureau of Economic Research.
TL;DR: A strong positive association between one's school attainment and that of one's parents has been consistently documented in numerous empirical studies, and the underlying cause has been the subject of contentious debate in the social sciences for many years.
Abstract: A strong positive association between one's school attainment and that of one's parents has been consistently documented in numerous empirical studies. The underlying cause of this intergenerational correlation has been the subject of contentious debate in the social sciences for many years. Two competing types of explanations are prominent. The first is based on the heritability of traits, that is, that children of more educated parents may inherit the abilities, personalities and preferences that led to the higher educational achievement of their parents. The second type of explanation is based on human capital production, namely that more educated parents, due to their own preferences for more educated children and/or due to their higher wealth, may invest more heavily in their children's human capital.
TL;DR: In this paper, a study of worker transitions between sectors using detailed panel data from Mexico and finds little evidence in favor of the dualistic view of the relationship between formal and informal labor markets.
Abstract: This article offers an alternative to the traditional dualistic view of the relationship between formal and informal labor markets. For many workers inefficiencies in formal sector protections and low levels of labor productivity may make informal sector employment a desirable alternative to formal sector employment. The analysis offers the first study of worker transitions between sectors using detailed panel data from Mexico and finds little evidence in favor of the dualistic view. Traditional earnings differentials cannot prove or disprove segmentation in the developing-country context. The patterns of worker mobility do not suggest a rigid labor market or one segmented along the formal and informal division.
TL;DR: The authors summarizes recent research in economics that investigates differentials by race and gender in the labor market, including recent extensions of taste-based theories, theories of occupational exclusion, and theories of statistical discrimination.
Abstract: This chapter summarizes recent research in economics that investigates differentials by race and gender in the labor market. We start with a statistical overview of the trends in labor market outcomes by race, gender and Hispanic origin, including some simple regressions on the determinants of wages and employment. This is followed in Section 3 by an extended review of current theories about discrimination in the labor market, including recent extensions of taste-based theories, theories of occupational exclusion, and theories of statistical discrimination. Section 4 discusses empirical research that provides direct evidence of discrimination in the labor market, beyond “unexplained gaps” in wage or employment regressions. The remainder of the chapter reviews the evidence on race and gender gaps, particularly wage gaps. Section 5 reviews research on the impact of pre-market human capital differences in education and family background that differ by race and gender. Section 6 reviews the impact of differences in both the levels and the returns to experience and seniority, with discussion of the role of training and labor market search and turnover on race and gender differentials. Section 7 reviews the role of job characteristics (particularly occupational characteristics) in the gender wage gap. Section 8 reviews the smaller literature on differences in fringe benefits by gender. Section 9 is an extensive discussion of the empirical work that accounts for changes in the trends in race and gender differentials over time. Of particular interest is the new research literature that investigates the impact of widening wage inequality on race and gender wage gaps. Section 10 reviews research that relates policy changes to race and gender differentials, including anti-discrimination policy. The chapter concludes with comments about a future research agenda.
TL;DR: This article developed a framework to describe value creation as a process comprising resource combinations and exchanges and use the framework to show how organizations in general, and business firms in particular, interact with markets to create economic value for themselves, for their members, and for society.
Abstract: We develop a framework to describe value creation as a process comprising resource combinations and exchanges and use the framework to show how organizations in general, and business firms in particular, interact with markets to create economic value for themselves, for their members, and for society. The theory offers an explanation of why neither a market nor a firm, by itself, can achieve adaptive efficiency and why institutional pluralism contributes to the process of economic development.
Posted Content•
TL;DR: In this paper, the authors apply the familiar theoretical distinction between general and specific training to the empirical task of estimating the returns to in-company training, and test for the relative effects of the two types of training on productivity growth.
Abstract: This paper applies the familiar theoretical distinction between general and specific training to the empirical task of estimating the returns to in-company training. Using a firm-level dataset which distinguishes between general and specific training, we test for the relative effects of the two types of training on productivity growth. We find that although general training has a statistically positive effect on productivity growth, no such effect is observable for specific training. This positive effect of general training remains when we control for factors such as changes in work organization and corporate re-structuring, firm size and the initial level of human capital in the enterprise. Moreover, the impact of general training varies positively with the level of capital investment.
TL;DR: In this article, a comprehensive model of the determinants of career success was examined based on Turner's (1960) contest- and sponsored-mobility systems, and the two forms of sponsorship were differentially related to career outcomes.
Abstract: Based on Turner's (1960) contest- and sponsored-mobility systems, a comprehensive model of the determinants of career success was examined. Human capital and motivational variables represented the contest-mobility system whereas leader–member exchange and supervisor career mentoring represented the sponsored-mobility system. Results based on data from 245 supervisor–subordinate dyads indicated limited support for the contest-mobility system and strong support for the sponsored-mobility system. Interestingly, the two forms of sponsorship were differentially related to career outcomes. Specifically, leader–member exchange was positively related to salary progression, promotability, and career satisfaction. Career mentoring, however, was only related to promotability. Copyright © 1999 John Wiley & Sons, Ltd.
DOI•
30 Nov 1999TL;DR: In this paper, the authors investigated the impact of gender inequality in education and employment on economic growth and development, and found that between 0.4-0.9 percent of the differences in growth rates between East Asia and Sub Saharan Africa, South Asia, and the Middle East can be accounted for by the larger gender gaps in education prevailing in the latter regions.
Abstract: Using cross-country and panel regressions, this report investigates to what extent gender inequality in education and employment may reduce growth and development. The report finds a considerable impact of gender inequality on economic growth which is robust to changes in specifications and controls for potential endogeneities. The results suggest that gender inequality in education has a direct impact on economic growth through lowering the average quality of human capital. In addition, economic growth is indirectly affected through the impact of gender inequality on investment and population growth. Point estimates suggest that between 0.4-0.9 percent of the differences in growth rates between East Asia and Sub Saharan Africa, South Asia, and the Middle East can be accounted for by the larger gender gaps in education prevailing in the latter regions. Moreover, the analysis shows that gender inequality in education prevents progress in reducing fertility and child mortality rates, thereby compromising progress in well-being in developing countries.
TL;DR: In this paper, the authors examined the impact of economic indicators, human capital, institutional legal environment, and existing technological infrastructure on the differences in Internet connectivity among OECD countries and found that economic wealth and telecommunications policy are the most salient predictors of a nation's Internet connectivity.
Posted Content•
TL;DR: Wang and Yao as mentioned in this paper constructed a measure of China's human capital stock from 1952 to 1999 and, using a simple growth accounting exercise, incorporated it in their analysis of the sources of growth during the pre-reform (1952-1977) and the reform period (1978-1999).
Abstract: July 2001 Both productivity growth and factor accumulation figured significantly in China's remarkable growth performance between 1978 and 1999, a period of reform. Considering China's need for an innovation-based knowledge economy, the recent declining rate of human capital accumulation - education - is a cause for concern. China's performance in economic growth and poverty reduction has been remarkable. There is an ongoing debate about whether this growth is mainly driven by productivity or factor accumulation. But few past studies had incorporated information on China's human capital stock, and thus contained an omission bias. Wang and Yao construct a measure of China's human capital stock from 1952 to 1999 and, using a simple growth accounting exercise, incorporate it in their analysis of the sources of growth during the pre-reform (1952-1977) and the reform period (1978-1999). They find that the accumulation of human capital in China (as measured by the average years of schooling for the population aged 15 to 64) was quite rapid and contributed significantly to growth and welfare. After incorporating human capital, they also find that the growth of total factor productivity still plays a positive and significant role during the reform period. In contrast, productivity growth was negative in the pre-reform period. The results are robust to changes in labor shares in GDP. The recent declining rate of human capital accumulation is a cause for concern, if China is to sustain its improvements in growth and welfare in the coming decade. Funding for basic education is unevenly distributed and insufficient in some poor regions. This paper - a product of the Economic Policy and Poverty Reduction Division, World Bank Institute - is part of a larger effort in the institute to examine country experience on globalization and growth. The authors may be contacted at ywang2@worldbank.org or yyao@imf.org.
TL;DR: In this article, the authors proposed a model of endogenous growth based on a balance act between accumulating human capital, which engenders growth, and accumulating political capital which mainly assures bureaucratic power.
Abstract: There Appears to be significant diversity in the incidence of bureaucratic corruption across countries at different stages of economic development and under different political and economic regimes. Little theoretical or empirical analysis has been offered, however, on the link between corruption, government, and growth. The paper attempts to fill the void through equilibrium models of endogenous growth. “balanced growth” is derived as a balancing act between accumulating human capital, which engenders growth, and accumulating political capital, which mainly assures bureaucratic power. The analysis focuses on the interplay between investment in these two types of capital and its implications for long‐term growth under alternative political regimes. Some propositions are tested and confirmed empirically.
Book•
30 Dec 1999
TL;DR: Knowledge Capitalism as discussed by the authors explores how the shift to a knowledge-based economy is redefining firms, empowering individuals, and reshaping the links between learning and work, using economic, management, and knowledgebased theories, supported by empirical data and illustrations from leading companies.
Abstract: From the Publisher:
Knowledge Capitalism probes the surface of contemporary economic and social change, revealing how the shift to a knowledge-based economy is redefining firms, empowering individuals, and reshaping the links between learning and work.. "Using economic, management, and knowledge-based theories, supported by empirical data and illustrations from leading companies, Knowledge Capitalism describes the emergence of a new breed of capitalist: one dependent on knowledge rather than physical resources. The author argues that industrial-era models of firm-market boundaries, work arrangements, and ownership and control are inhibiting firms' and individuals' success in the emerging knowledge economy. New models are proposed based on knowledge-centred organizations, knowledge-led growth, and knowledge supply as distinct from labour supply or flexible employment. With this book he provides a practical tool-set for anybody wanting to interpret and manage change in a rapidly deconstructing economic environment whether you are in business, working, or simply wondering what the future may hold.
TL;DR: Haltiwanger et al. as discussed by the authors investigated the connection between a key measure of firm performance, labor productivity, and the composition of the firm's workforce as measured by observable worker characteristics.
Abstract: Recent research using longitudinal microeconomic databases on businesses and individuals has uncovered tremendous heterogeneity Across businesses, even within narrowly defined industrial sectors, we observe large differences in the levels and growth rates of inputs, outputs, and productivity Across workers, even controlling for demographic characteristics, wage and employment outcomes vary a great deal, and there are sizable worker flows across jobs in the economy These worker flows are closely connected to firm outcomes, reflecting in large part the ongoing shift in resources from less productive to more productive employers The primary message is that the continual process of matching and sorting as businesses and workers seek their niches is heterogeneous, with experimentation, learning, and selection all playing important roles Understanding the connection between the matching and sorting of businesses and workers is at the very heart of the overlap between industrial organization and labor economics However, due to the paucity of data linking businesses and workers at the micro level, we know relatively little about these interactions Although a large empirical literature suggests that worker outcomes are associated with firm characteristics (notable examples are firm-size wage effects, compensating wage differentials, and interindustry wage differentials), very little is known about the converse-the process by which business outcomes are associated with the characteristics of their employees There are a number of questions associated with this process Do employers choose different modes of production resulting in skill segregation, as suggested by the sorting and assignment hypotheses in Michael Kremer (1993) and Michael Sattinger (1993), or do all firms in a given industry select roughly the same workforce composition? How do employers change their workforce composition either to accommodate demand shocks or to experiment with new modes of production? In turn, what is the connection between these different decisions regarding workforce composition and observable business outcomes such as survival, growth, and productivity? In this short paper, our empirical objectives are relatively modest compared to these broad research questions Our focus is to provide an initial investigation into the connection between a key measure of firm performance, labor productivity, and the composition of the firm's workforce as measured by observable worker characteristics We exploit longitudinal matched employeremployee micro data developed under a recent pilot project at the US Census Bureau Our data set contains longitudinal information on key outcomes of the businesses, as well as many of the basic demographic characteristics for the universe of workers at these businesses Although longitudinal matched employer-employee micro data have been developed in a variety of countries over the last decade or so (see John Abowd and Francis Kramarz, 1999), ours is the first large-scale micro-level data set in the United States that allows the investigation * Haltiwanger: Department of Economics, University of Maryland, College Park, MD 20742, US Bureau of the Census, and NBER; Lane: Department of Economics, American University, Washington, DC 20016, and US Bureau of the Census; Spletzer: Bureau of Labor Statistics, 2 Massachusetts Ave, NE, Washington, DC 20212 We thank Adela Luque and Javier Miranda for superb research assistance, and Charles Brown and Marilyn Manser for comments on an earlier draft This research was conducted at the Center for Economic Studies at the US Bureau of the Census while the second author was an American Statistical Association Census Bureau fellow The analysis and results are attributable to the authors and do not necessarily reflect concurrence of the institutions they represent
TL;DR: In this article, the authors investigate empirically the links between social capital, household welfare, and poverty in Indonesia and conclude that the impact of social capital on household welfare is usually indirect.
Abstract: The objective of this paper is to investigate empirically the links between social capital, household welfare, and poverty in Indonesia. Specifically, the authors undertake a multivariate analysis of the role of local institutions in affecting household welfare and poverty outcomes and in determining access to services. The authors compare the impact of household memberships in local associations with the impact of human capital. They first consider six social capital dimensions: the density of associations, their internal heterogeneity, the frequency of meeting attendance, members' effective participation in decisionmaking, payment of dues, and the community orientation of associations. Second, in addition to estimating the effects on household welfare, the authors model the impact of ownership of social capital on the incidence of poverty. They also attempt to compare the returns to social capital between poor and non-poor households. Third, since the impact of social capital on household welfare is usually indirect, they attempt to measure some of these links--access to credit, asset accumulation, collective action--directly. Fourth, they revisit the question of whether social capital operates at the household level or at the village level. Fifth, the authors differentiate four types of institutions, specifically differentiating between voluntary associations and those with mandatory membership. Lastly, they revisit the question of causality.
TL;DR: In this article, the authors explore the economic role of the firm in a market economy and argue that the Hart-Moore model can only explain why individuals own assets, but not why firms own assets.
Abstract: This article explores the economic role of the firm in a market economy. The analysis begins with a discussion and critique of the property rights approach to the theory of the firm as exposited in the recent work by Hart and Moore (“Property Rights and the Nature of the Firm”). It is argued that the Hart–Moore model, taken literally, can only explain why individuals own assets, but not why firms own assets. In particular, the logic of the model suggests that each asset should be free standing in order to provide maximal flexibility for the design of individual incentives. These implications run counter to fact. One of the key features of the modern firm is that it owns essentially all the productive assets that it employs. Employees rarely own any assets; they only contribute human capital. Why is the ownership of assets clustered in firms? This article outlines an answer based on the notion that control over physical assets gives control over contracting rights to those assets. Metaphorically, the firm is viewed as a miniature economy, an “island” economy, in which asset ownership conveys the CEO the power to define the “rules of the game,” that is, the ability to restructure the incentives of those that accept to do business on (or with) the island. The desire to regulate trade in this fashion stems from contractual externalities characteristic of imperfect information environments. The inability to regulate all trade through a single firm stems from the value of exit rights as an incentive instrument and a tool to discipline the abuse of power.
TL;DR: In this article, the authors identify the contribution of general, sector specific and firm specific human capital to the growth of wages of young workers in Germany and develop an identification strategy which relies on the use of firm closures.
Abstract: In this paper we study the sources of wage growth. We identify the contribution to such growth of general, sector specific and firm specific human capital. Our results are interpretable within the context of a model where the returns to human capital may be heterogeneous and where firms may offer different combinations of entry level wages and firm specific human capital development. We allow for the possibility that wages are match specific and that workers move jobs as a result of identifying a better match. To estimate the average returns to experience, sector tenure and firm specific tenure within this context, we develop an identification strategy which relies on the use of firm closures. Our data source is a new and unique administrative data-set for Germany that includes complete work histories as well as individual characteristics. We find positive returns to experience and firm tenure for skilled workers. The returns to experience for unskilled workers are small and insignificant after 2 years of experience. Their returns to sector tenure are also zero. However, their returns to firm tenure are substantial. In this paper we study the growth of wages of young workers in Germany. Knowing the extent and reasons for individual wage growth over the life cycle is important for a number of areas in Economics. Just to mention two examples: first, it is a key element to understanding and designing active labour market programmes. Many such programmes offer temporary (and often subsidized) work opportunities. Examples are the New Deal in the U.K. and the Swedish programmes as well as a number of programmes in Germany. These programmes are based on the assumption that general skills are sufficiently enhanced while working, so as to render the workers employable without a wage subsidy. Thus the success of these programmes depends on how skills improve on the job for the target population, and whether this skill enhancement is transferable across jobs. Second, it is a key to understanding the benefits and costs of job mobility. This in turn matters for a number of policy issues, including the design of pension policies, relating for example to final salary schemes. As a result of this widespread interest, a large body of empirical research has focused on obtaining estimates for the returns of experience and seniority. 1 Our study uses a new and unique administrative data-set with a number of features that are important for our analysis and allow us to avoid many problems encountered in earlier work in this field. In our model wages grow due to learning by doing, which may be heterogeneous across individuals. Moreover, since firms offer different career profiles and because we allow for match specific effects on wages, investments take the form of searching for the firm with the most desirable learning by doing characteristics (career structure). 2
TL;DR: The authors showed that there is a correlation in one dataset, but it is typically hidden by unrepresentative observations, and that economic growth appears to be unrelated to increases in educational attainment.
TL;DR: The hypothesis that increases in the schooling of women enhance the human capital of the next generation and thus make a unique contribution to economic growth is assessed on the basis of data describing green revolution India as discussed by the authors.
Abstract: The hypothesis that increases in the schooling of women enhance the human capital of the next generation and thus make a unique contribution to economic growth is assessed on the basis of data describing green revolution India. Estimates are obtained that indicate that a component of the significant and positive relationship between maternal literacy and child schooling in the Indian setting reflects the productivity effect of home teaching and that the existence of this effect, combined with the increase in returns to schooling for men, importantly underlies the expansion of female literary following the onset of the green revolution.
TL;DR: In this paper, the authors derive nine implicatiions of the human capital approach that are distinct from Galton's Evidence from the PIS, SCF, and NLSY micro data sets as well as results reported in previous literatures suggest that four of the unique implications are refuted two implications are verified, and mixed results are obtained for three others.
Abstract: A century ago, Francis Galton proposed a simple yet powerful model of inheritance Gary Backer's human capital model is often used to analyze important empirical and policy questions, but does it dominate Galton's from a positive point of view? I derive nine implicatiions of the human capital approach that are distinct from Galton's Evidence from the PIS, SCF, and NLSY micro data sets as well as results reported in previous literatures suggest that four of the unique implications are refuted two implications are verified, and mixed results are obtained for three others Some extensions of economics recently developed by Becker and others, when applied to inheritance, may improve economics' predictions