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The Demand for Human Capital: A Microeconomic Approach

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  • Michael Gort
  • Seong-Hoon Lee
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    Abstract

    We propose a model for explaining the demand for human capital based on a CES production function with human capital as an explicit argument in the function. The resulting factor demand model is tested with data on roughly 6,000 plants from the Census Bureau’s Longitudinal Research Database. The results show strong complementarity between physical and human capital. Moreover, the complementarity is greater in high than in low technology industries. The results also show that physical capital of more recent vintage is associated with a higher demand for human capital. While the age of a plant as a reflection of learning-by-doing is positively related to the accumulation of human capital, this relation is more pronounced in low technology industries.

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    File URL: ftp://ftp2.census.gov/ces/wp/2001/CES-WP-01-16.pdf
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    Bibliographic Info

    Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 01-16.

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    Date of creation: Dec 2001
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    Handle: RePEc:cen:wpaper:01-16

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    Keywords: CES; economic; research; micro; data; microdata; chief; economist;

    References

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    1. Griliches, Zvi, 1969. "Capital-Skill Complementarity," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 465-68, November.
    2. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.
    3. Fallon, P R & Layard, P R G, 1975. "Capital-Skill Complementarity, Income Distribution, and Output Accounting," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 83(2), pages 279-301, April.
    4. Bahk, Byong-Hong & Gort, Michael, 1993. "Decomposing Learning by Doing in New Plants," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(4), pages 561-83, August.
    5. Dunne, Timothy & Schmitz, James A, Jr, 1995. "Wages, Employment Structure and Employer Size-Wage Premia: Their Relationship to Advanced-Technology Usage at US Manufacturing Establishments," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 62(245), pages 89-107, February.
    6. Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997. "Capital-skill complementarity and inequality: a macroeconomic analysis," Staff Report, Federal Reserve Bank of Minneapolis 239, Federal Reserve Bank of Minneapolis.
    7. Stokey, Nancy L, 1996. " Free Trade, Factor Returns, and Factor Accumulation," Journal of Economic Growth, Springer, Springer, vol. 1(4), pages 421-47, December.
    8. Fellner, William, 1969. "Specific interpretations of learning by doing," Journal of Economic Theory, Elsevier, Elsevier, vol. 1(2), pages 119-140, August.
    9. Sato, Ryuzo, 1977. "Homothetic and Non-Homothetic CES Production Functions," American Economic Review, American Economic Association, American Economic Association, vol. 67(4), pages 559-69, September.
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    Cited by:
    1. Björn Alecke & Timo Mitze & Gerhard Untiedt, 2009. "Internal Migration, Regional Labour Market Dynamics and Implications for German East-West Disparities – Results from a Panel VAR," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0096, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    2. Michael Gort & Seong-Hoon Lee, 2003. "Managerial Efficiency, Organizational Capital and Productivity," Working Papers, Center for Economic Studies, U.S. Census Bureau 03-08, Center for Economic Studies, U.S. Census Bureau.

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