Showing papers on "Human capital published in 2013"

The Economic Importance of Financial Literacy: Theory and Evidence

Abstract: This paper undertakes an assessment of a rapidly growing body of economic research on financial literacy. We start with an overview of theoretical research which casts financial knowledge as a form of investment in human capital. Endogenizing financial knowledge has important implications for welfare as well as policies intended to enhance levels of financial knowledge in the larger population. Next, we draw on recent surveys to establish how much (or how little) people know and identify the least financially savvy population subgroups. This is followed by an examination of the impact of financial literacy on economic decision-making in the United States and elsewhere. While the literature is still young, conclusions may be drawn about the effects and consequences of financial illiteracy and what works to remedy these gaps. A final section offers thoughts on what remains to be learned if researchers are to better inform theoretical and empirical models as well as public policy.

The Growth of Low-Skill Service Jobs and the Polarization of the US Labor Market

Abstract: We offer an integrated explanation and empirical analysis of the polarization of U.S. employment and wages between 1980 and 2005, and the concurrent growth of low skill service occupations. We attribute polarization to the interaction between consumer preferences, which favor variety over specialization, and the falling cost of automating routine, codifiable job tasks. Applying a spatial equilibrium model, we derive, test, and confirm four implications of this hypothesis. Local labor markets that were specialized in routine activities differentially adopted information technology, reallocated low skill labor into service occupations (employment polarization), experienced earnings growth at the tails of the distribution (wage polarization), and received inflows of skilled labor.

Monopsony in Motion: Imperfect Competition in Labor Markets

Abstract: What happens if an employer cuts wages by one cent? Much of labour economics is built on the assumption that all the workers will quit immediately. Here, Alan Manning mounts a systematic challenge to the standard model of perfect competition. "Monopsony in Motion" stands apart by analyzing labour markets from the real-world perspective that employers have significant market (or monopsony) power over their workers. Arguing that this power derives from frictions in the labour market that make it time-consuming and costly for workers to change jobs, Manning re-examines much of labour economics based on this alternative and equally plausible assumption.This book addresses the theoretical implications of monopsony and presents a wealth of empirical evidence. Our understanding of the distribution of wages, unemployment, and human capital can all be improved by recognizing that employers have some monopsony power over their workers. Also considered are policy issues including the minimum wage, equal pay legislation, and caps on working hours. In a monopsonistic labour market, concludes Manning, the 'free' market can no longer be sustained as an ideal and labour economists need to be more open-minded in their evaluation of labour market policies. "Monopsony in Motion" will represent for some a new fundamental text in the advanced study of labour economics, and for others, an invaluable alternative perspective that henceforth must be taken into account in any serious consideration of the subject.

Investing in Preschool Programs

Abstract: early childhood education programs constitute worthy social investments in the human capital of children. We begin with a short overview of existing early childhuman capital of children. We begin with a short overview of existing early childhood education programs, and then summarize results from a substantial body of hood education programs, and then summarize results from a substantial body of methodologically sound evaluations of the impacts of early childhood education. We methodologically sound evaluations of the impacts of early childhood education. We fithat the evidence supports few unqualifi ed conclusions. Many early childhood fi nd that the evidence supports few unqualifi ed conclusions. Many early childhood

Human Capital and Regional Development

Abstract: We investigate the determinants of regional development using a newly constructed database of 1569 sub-national regions from 110 countries covering 74 percent of the world’s surface and 97 percent of its GDP. We combine the cross-regional analysis of geographic, institutional, cultural, and human capital determinants of regional development with an examination of productivity in several thousand establishments located in these regions. To organize the discussion, we present a new model of regional development that introduces into a standard migration framework elements of both the Lucas (1978) model of the allocation of talent between entrepreneurship and work, and the Lucas (1988) model of human capital externalities. The evidence points to the paramount importance of human capital in accounting for regional differences in development, but also suggests from model estimation and calibration that entrepreneurial inputs and possibly human capital externalities help understand the data.

What Are Microfoundations

Abstract: In the extant organizational, management, and strategy literatures there are now frequent calls for microfoundations. However, there is little consensus on what micro- foundations are and what they are not. In this paper we first (briefly) review the history of the microfoundations discussion and then discuss what microfoundations are and are not. We highlight four misconceptions or "half-truths" about microfoundations: (1) that microfoundations are psychology, human resources, or micro-organizational behavior, (2) that borrowed concepts constitute microfoundations, (3) that microfoundations lead to an infinite regress, and (4) that microfoundations deny the role of structure and institutions. We discuss both the partial truths and the misconceptions associated with the above understandings of microfoundations, and we argue that questions of social aggregation and emergence need to be center stage in any discussion of microfoundations. We link our arguments about microfoundations and aggregation with closely related calls for new areas of research, such as "behavioral strategy" and the domain of multilevel human capital research. We discuss various forms of social aggregation and also highlight associated opportunities for future research, with a specific focus on the origins of capabilities and competitive advantage.

Environment, Health, and Human Capital

Abstract: In this review, we discuss three major contributions economists have made to our understanding of the relationship between the environment and individual well-being. First, in explicitly recognizing how optimizing behavior, particularly in the form of residential sorting, can lead to nonrandom assignment of pollution, economists have employed a wide range of quasi-experimental techniques to develop causal estimates of the effect of pollution. Second, economic research has placed a considerable focus on the role of avoidance behavior, which is an important component for understanding the difference between biological and behavioral effects of pollution and for proper welfare calculations. Lastly, economic research has expanded the focus of analysis beyond traditional health outcomes to include measures of human capital, including labor supply, productivity, and cognition. Our review of the quasi-experimental evidence on this topic suggests that pollution does indeed have a wide range of effects on individual well-being, even at levels well below current regulatory standards. Given the importance of health and human capital as an engine for economic growth, these findings underscore the role of environmental conditions as an important factor of production. (JEL I12, I31, J24, Q51, Q53)

Mechanisms for Managing Ambidexterity: A Review and Research Agenda

Abstract: Ambidexterity is of central importance to the competitive advantage of the firm, yet to date there is limited understanding of how it is managed. The theorization of ambidexterity is inadequate for complex, practical realities and, in turn, this hinders the way in which it can aid the management of ambidexterity in practice. This paper asks: What are the mechanisms for achieving ambidexterity? The authors use a systematic review to develop a research framework which integrates intellectual capital resources (organizational, social and human capital) across various levels of analysis (organization, group and individual). This review extends understanding of the generic mechanisms (i.e. temporal, structural and contextual ambidexterity) that dominate the literature. This allows for a more fine-grained understanding of how ambidexterity is achieved and enables avenues for further research to be identified.

Skill relatedness and firm diversification

Abstract: Because of the importance of human capital, a firm's choice of diversification targets will depend on whether these targets offer opportunities for leveraging existing human resources. We propose to quantify the similarity of different industries' human capital or skill requirements, that is, the industries' skill relatedness, by using information on cross-industry labor flows. Labor flows among industries can be used to identify skill relatedness, because individuals changing jobs will likely remain in industries that value the skills associated with their previous work. Estimates show that firms are far more likely to diversify into industries that have ties to the firms' core activities in terms of our skill-relatedness measure than into industries without such ties or into industries that are linked by value chain linkages or by classification-based relatedness. Copyright (C) 2012 John Wiley & Sons, Ltd.

The Allocation of Talent and U.S. Economic Growth

Abstract: Over the last 50 years, there has been a remarkable convergence in the occupational distribution between white men, women, and blacks. We measure the macroeconomic consequences of this convergence through the prism of a Roy model of occupational choice in which women and blacks face frictions in the labor market and in the accumulation of human capital. The changing frictions implied by the observed occupational convergence account for 15 to 20 percent of growth in aggregate output per worker since 1960.

Health and Economic Growth

Abstract: Since the mid 1980s, research on economic growth has experienced a boom, beginning with the work of Romer (1986). The new “endogenous growth” theories have focused on productivity advances that derive from technological progress and increased human capital in the form of education. Barro and Sala-i-Martin (1995) explore these theories and also discuss extensions to allow for open economies, diffusion of technology, migration of persons, fertility choice, and variable labor supply. The government can be important in the models in terms of its policies on maintenance of property rights, encouragement of free markets, taxation, education, and public infrastructure. One area that has received little attention in the recent literature on growth theory is the two-way interplay between health and economic growth. Two preliminary efforts in this direction are Ehrlich and Lui (1991) and Meltzer (1995). Also, the empirical work of Barro (1996) and others suggests that health status, as measured by life expectancy or analogous aggregate indicators, is an important contributor to subsequent growth. In fact, initial health seems to be a better predictor than initial education of subsequent economic growth. The main purpose of this study is to apply the spirit and apparatus of the recent advances in growth theory to the interaction between health and growth. The analysis is conceptual and is intended to form the basis for further theorizing and for empirical analyses of the joint determination of health and growth. The discussion begins with a survey of existing theories and empirical evidence on the determinants of economic growth. Then the paper develops models of the interplay between health and growth.

Strengthening State Capabilities: The Role of Financial Incentives in the Call to Public Service*

Abstract: We study a recent recruitment drive for public sector positions in Mexico. Different salaries were announced randomly across recruitment sites, and job offers were subsequently randomized. Screening relied on exams designed to measure applicants' intellectual ability, personality, and motivation. This allows the first experimental estimates of (i) the role of financial incentives in attracting a larger and more qualified pool of applicants, (ii) the elasticity of the labor supply facing the employer, and (iii) the role of job attributes (distance, attractiveness of the municipal environment) in helping fill vacancies, as well as the role of wages in helping fill positions in less attractive municipalities. A theoretical model guides each stage of the empirical inquiry. We find that higher wages attract more able applicants as measured by their IQ, personality, and proclivity towards public sector work – i.e., we find no evidence of adverse selection effects on motivation; higher wage offers also increased acceptance rates, implying a labor supply elasticity of around 2 and some degree of monopsony power. Distance and worse municipal characteristics strongly decrease acceptance rates but higher wages help bridge the recruitment gap in worse municipalities.

Juvenile Incarceration, Human Capital and Future Crime: Evidence from Randomly-Assigned Judges

Abstract: Over 130,000 juveniles are detained in the US each year with 70,000 in detention on any given day, yet little is known whether such a penalty deters future crime or interrupts social and human capital formation in a way that increases the likelihood of later criminal behavior. This paper uses the incarceration tendency of randomly-assigned judges as an instrumental variable to estimate causal effects of juvenile incarceration on high school completion and adult recidivism. Estimates based on over 35,000 juvenile offenders over a ten-year period from a large urban county in the US suggest that juvenile incarceration results in large decreases in the likelihood of high school completion and large increases in the likelihood of adult incarceration. These results are in stark contrast to the small effects typically found for adult incarceration, but consistent with larger impacts of policies aimed at adolescents.

A resource-based perspective on human capital losses, HRM investments, and organizational performance

Abstract: Reversing the focus on human capital accumulations in the resource-based literature, the authors examine the issue of human capital losses and organizational performance. They theorize that human capital losses markedly diminish the inimitability of human capital stores initially, but that the negative effects are attenuated as human capital losses increase. They argue further that these effects are more dramatic when human resource management (HRM) investments are substantial. As predicted, Study 1 shows that the human capital losses (voluntary turnover rates)-workforce performance relationship takes the form of an attenuated negative relationship when HRM investments are high. Study 2 shows stronger curvilinear effects of voluntary turnover rates on financial performance via workforce productivity under these conditions. Implications for resource-based theory and strategic HRM are addressed.

Regional systems of entrepreneurship: the nexus of human capital, knowledge and new firm formation

Abstract: This article focuses on entrepreneurship in economic geography and aims at a systematic investigation of regional variation in knowledge-based entrepreneurial activity. We develop and test a three-phase structural model forregional systems of entrepreneurshipafter introducing a systems approach to entrepreneurship. The model is built upon the absorptive capacity theory of knowledge spillover entrepreneurship that identifies new knowledge as one source of entrepreneurial opportunities and human capital as the major source of entrepreneurial absorptive capacity. Based on data of US metropolitan areas, we find that entrepreneurial absorptive capacity is a critical driving force for knowledge-based entrepreneurial activity. We also find that high technology and cultural diversity contribute to the vibrancy of regional systems of entrepreneurship.

Intellectual capital and financial performance: an evaluation of the Australian financial sector

Abstract: Purpose – The purpose of this paper is to examine the intellectual capital (IC) performance of the Australian Financial Sector for the period 2006‐2008. It also aims to examine the relationship between IC performance and the financial performance of the financial sector.Design/methodology/approach – The value added intellectual coefficient (VAIC) approach developed by Pulic is used to determine the IC performance of the Australian financial sector. The required data to calculate different constituents of IC was obtained from the annual reports of Australian Financial Sector companies.Findings – The value creation capability of financial sector in Australia is highly influenced by human capital. About two thirds of the sample companies have very low levels of intellectual capital efficiency. The performance of various components of VAIC and overall VAIC differs across all subsectors in the financial sector. Investment companies have high value VAIC due to higher a level of human capital efficiency, as comp...

Education and Economic Growth

Abstract: the recognition that the dierence between prosperity and poverty for a country depends on how fast it grows over the long term. Although standard macroeconomic policies are important for growth, other aspects of \policy" | broadly interpreted to encompass all government activities that matter for economic performance | are even more signicant. This paper focuses on human capital as a determinant of economic growth. Although human capital includes education, health, and aspects of \social capital", the main focus of the present study is on education. The analysis stresses the distinction between the quantity of education | measured by years of attainment at various levels | and the quality | gauged by scores on internationally comparable examinations. The recognition that the determinants of long-term economic growth were the central macroeconomic problem was fortunately accompanied in the late 1980s by important advances in the theory of economic growth. This period featured the development of \endogenous-growth" models, in which the long-term rate of growth was determined within the model. A key feature of these models is a theory of technological progress, viewed as a process whereby purposeful research and application lead over time to new and better products and methods of production and to the adoption of superior technologies that were developed in other countries or sectors. One major contributor in this area is Romer (1990).

The "Task Approach" to Labor Markets" An Overview

Abstract: An emerging literature argues that changes in the allocation of workplace “tasks” between capital and labor, and between domestic and foreign workers, has altered the structure of labor demand in industrialized countries and fostered employment polarization—that is, rising employment in the highest and lowest paid occupations. Analyzing this phenomenon within the canonical production function framework is challenging, however, because the assignment of tasks to labor and capital in the canonical model is essentially static. This essay sketches an alternative model of the assignment of skills to tasks based upon comparative advantage, reviews key conceptual and practical challenges that researchers face in bringing the “task approach” to the data, and cautions against two common pitfalls that pervade the growing task literature. I conclude with a cautiously optimistic forecast for the potential of the task approach to illuminate the interactions among skill supplies, technological capabilities, and trade and offshoring opportunities, in shaping the aggregate demand for skills, the assignment of skills to tasks, and the evolution of wages.

Physical activity: an underestimated investment in human capital?

Abstract: Despite the fact that physical activity is universally acknowledged to be an important part of healthy functioning and well-being, the full scope of its value is rarely appreciated. This article introduces a novel framework for understanding the relationships between physical activity (and specifically sport-related forms of physical activity) and different aspects of human development. It proposes that the outcomes of physical activity can be framed as differential 'capitals' that represent investments in domain-specific assets: Emotional, Financial, Individual, Intellectual, Physical, and Social. These investments, especially when made early in the life course, can yield significant rewards, both at that time and for years to come. The paper presents a new model-the Human Capital Model-that makes sense of these effects, outlines the different capitals, and briefly articulates the conditions necessary for the realization of Human Capital growth through physical activity.

Intellectual capital and performance within the banking sector of Luxembourg and Belgium

Abstract: Purpose – Intellectual capital is widely acknowledged as the most critical resource of modern organizations. Nevertheless, empirical evidence on its actual contribution to the dynamics of the value creation process remains scarce, especially within certain sectors and geographic regions. The purpose of this paper is to address this gap by investigating the effects of intellectual capital and its components on business performance in banking institutions within Luxembourg and Belgium.Design/methodology/approach – This empirical research is conducted using a dedicated survey instrument administered to over 200 banks. Data analysis is achieved through structural equation modeling.Findings – Results indicate that human capital contributes both directly and indirectly to business performance in the banking sector. Structural and relational capital are positively related to business performance, though results are not statistically significant. Surprisingly, relational capital has been evidenced to negatively m...

The development of entrepreneurial leadership : the role of human, social and institutional capital

Abstract: This paper contributes to the literature on entrepreneurial leadership development. Leadership studies are characterized by an increasing emphasis given to an individual leader's social and organizational domain. Within the context of human capital and social capital theory, the paper reflects on the emergence of a social capital theory of leadership development. Using a retrospective, interpretivist research method, the authors present the experience of a cohort of business leaders on an executive development programme to uncover the everydayness of leadership development in practice. Specifically, they explore how entrepreneurial leadership develops as a social process and what the role of social capital is in this. The findings suggest that the enhancement of leaders’ human capital only occurred through their development of social capital. There is not, as extant literature suggests, a clear separation between leader development and leadership development. Further, the analysis implies that the social capital theory of leadership is limited in the context of the entrepreneurial small firm, and the authors propose that it should be expanded to incorporate institutional capital, that is, the formal structures and organizations which enhance the role of social capital and go beyond enriching the human capital stock of individual leaders.

Assessing Foreign Aid's Long-Run Contribution to Growth in Development

Abstract: This paper confirms recent evidence of a positive impact of aid on growth and widens the scope of evaluation to a range of outcomes including proximate sources of growth (e.g., physical and human capital), indicators of social welfare (e.g., poverty and infant mortality), and measures of economic transformation (e.g., share of agriculture and industry in value added). Focusing on long-run cumulative effects of aid in developing countries, and taking due account of potential endogeneity, a coherent and favorable pattern of results emerges. Aid has over the past forty years stimulated growth, promoted structural change, improved social indicators and reduced poverty.

Education and Economic Growth

Abstract: the recognition that the dierence between prosperity and poverty for a country depends on how fast it grows over the long term. Although standard macroeconomic policies are important for growth, other aspects of \policy" | broadly interpreted to encompass all government activities that matter for economic performance | are even more signicant. This paper focuses on human capital as a determinant of economic growth. Although human capital includes education, health, and aspects of \social capital", the main focus of the present study is on education. The analysis stresses the distinction between the quantity of education | measured by years of attainment at various levels | and the quality | gauged by scores on internationally comparable examinations. The recognition that the determinants of long-term economic growth were the central macroeconomic problem was fortunately accompanied in the late 1980s by important advances in the theory of economic growth. This period featured the development of \endogenous-growth" models, in which the long-term rate of growth was determined within the model. A key feature of these models is a theory of technological progress, viewed as a process whereby purposeful research and application lead over time to new and better products and methods of production and to the adoption of superior technologies that were developed in other countries or sectors. One major contributor in this area is Romer (1990).

Cities through a “gender lens”: a golden “urban age” for women in the global South?:

Abstract: Although urban women generally enjoy some advantages over their rural counterparts, a range of gender inequalities and injustices persist in urban areas that constrain their engagement in the labour market and in informal enterprises and inhibit the development of capabilities among younger women. These include unequal access to decent work, human capital acquisition, financial and physical assets, intra-urban mobility, personal safety and security, and representation in formal structures of urban governance. But the nature of these varies for different groups of women, not only on account of poverty status and where they live in the city, but also according to age, household characteristics, degree of engagement in income-generating activities and so on. This paper reviews what we have learnt from the literature on gender and urban development. It discusses disparities in access to education and vocational training and to land and housing ownership through a "gender lens". It considers service deficiencies and associated time burdens, which limit income generation among women. Violence and gender, and gender divisions in access to different spaces within the city and in engagement in urban politics, are also covered. These factors cast doubt on whether women's contributions to the prosperity often associated with urbanization are matched by commensurate returns and benefits. Language: en

The Effects of General and Specific Human Capital on Long-Term Growth and Failure of Newly Founded Businesses

Abstract: The model developed in this paper draws on human capital theory to explain how newly founded business ventures achieve long-term growth and reduce their chances of failure Using a sample of 201 business start-ups and assessing growth and venture failure over a period of 12 years, we found that general and specific human capital lead to growth and failure in different ways More specifically, we found that the effect of general human capital on failure was mediated by growth Unexpectedly, specific human capital was not related to growth and had direct negative effects on business failure

The missing pillar: the creativity theory of knowledge spillover entrepreneurship

Abstract: Knowledge spillover theory of entrepreneurship and the prevailing theory of economic growth treat opportunities as endogenous and generally focus on opportunity recognition by entrepreneurs. New knowledge created endogenously results in knowledge spillovers enabling inventors and entrepreneurs to commercialize it. This article discusses that knowledge spillover entrepreneurship depends not only on ordinary human capital, but more importantly also on creativity embodied in creative individuals and diverse urban environments that attract creative classes. This might result in self-selection of creative individuals into entrepreneurship or enable entrepreneurs to recognize creativity and commercialize it. This creativity theory of knowledge spillover entrepreneurship is tested utilizing data on European cities.