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The Relation among Human Capital, Productivity, and Market Value: Building Up from Micro Evidence

In: Measuring Capital in the New Economy

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  • John M. Abowd
  • John Haltiwanger
  • Ron Jarmin
  • Julia Lane
  • Paul Lengermann
  • Kristin McCue
  • Kevin McKinney
  • Kristin Sandusky

Abstract

This paper investigates and evaluates the direct and indirect contribution of human capital to business productivity and shareholder value. The impact of human capital may occur in two ways: the specific knowledge of workers at businesses may directly increase business performance, or a skilled workforce may also indirectly act as a complement to improved technologies, business models or organizational practices. We use newly created firm-level measures of workforce human capital and productivity to examine links between those measures and the market value of the employing firm. The new human capital measures come from an integrated employer-employee data base under development at the US Census Bureau. We link these data to financial information from Compustat at the firm level, which provides measures of market value and tangible assets. The combination of these two sources permits examination of the link between human capital, productivity, and market value. There is a substantial positive relation between human capital and market value that is primarily related to the unmeasured personal characteristics of the employees, which are captured by the new measures.

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This chapter was published in:

  • Carol Corrado & John Haltiwanger & Dan Sichel, 2005. "Measuring Capital in the New Economy," NBER Books, National Bureau of Economic Research, Inc, number corr05-1, May.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 10621.

    Handle: RePEc:nbr:nberch:10621

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    1. Kremer, M & Maskin, E, 1996. "Wage Inequality and Segregation by Skill," Working papers 96-23, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. John M. Abowd & Paul A. Lengermann & Kevin L. McKinney, 2002. "The Measurement of Human Capital in the U.S. Economy," Longitudinal Employer-Household Dynamics Technical Papers 2002-09, Center for Economic Studies, U.S. Census Bureau, revised Mar 2003.
    3. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 1999. "Information Technology, Workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence," NBER Working Papers 7136, National Bureau of Economic Research, Inc.
    4. Bronwyn H. Hall, 1990. "The Manufacturing Sector Master File: 1959-1987," NBER Working Papers 3366, National Bureau of Economic Research, Inc.
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