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Changes in Human Capital: Implications for Productivity Growth in the Euro Area

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Author Info
Guido Schwerdt ()
Jarkko Turunen

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Abstract

The euro area has experienced a sustained decline in labour productivity growth sincethe 1980s. In the economic literature this phenomenon is commonly explained by adecline in capital deepening and lower total factor productivity (TFP) growth. However,the decline in labour productivity growth might partly also reflect a lower contributionof labour quality growth. We present evidence of changes in human capital in a numberof euro area countries based on a fixed-weight index for labour quality growth for boththe employed population and the labour force. We then evaluate the significance ofthese changes for recent developments in productivity growth. Our findings suggest thateuro area labour quality has indeed moderated towards the end of the 1990’s, but theimpact on labour productivity growth is small compared to the overall decline in capitaldeepening and total factor productivity growth.

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Publisher Info
Paper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Paper No. 53.

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Date of creation: 2007
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Handle: RePEc:ces:ifowps:_53

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Related research
Keywords: Human capital; labour quality; total factor productivity; growth accounting;

Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

References listed on IDEAS
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  1. Guido Schwerdt & Jarkko Turunen, 2006. "Growth in euro area labour quality," Working Paper Series 575, European Central Bank. [Downloadable!]
    Other versions:
  2. Finn E. Kydland & Edward C. Prescott, 1993. "Cyclical movements of the labor input and its implicit real wage," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 12-23. [Downloadable!]
  3. Andrea Brandolini & Piero Cipollone, 2001. "Multifactor Productivity and Labour Quality in Italy, 1981-2000," Temi di discussione (Economic working papers) 422, Bank of Italy, Economic Research Department. [Downloadable!]
  4. Timmer, Marcel P. & Ypma, Gerard & Ark, Bart van der, 2003. "IT in the European Union: driving productivity divergence?," GGDC Research Memorandum 200363, Groningen Growth and Development Centre, University of Groningen. [Downloadable!]
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    Other versions:
  6. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier. [Downloadable!] (restricted)
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  10. Orley Ashenfelter & Colm Harmon & Hessel Oosterbeek, 1999. "A Review of Estimates of the Schooling/Earnings Relationship, with Tests for Publication Bias," Working Papers 804, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
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  11. Lawrence F. Katz & Kevin M. Murphy, 1991. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," NBER Working Papers 3927, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  12. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-63, July.
    Other versions:
  13. Dirk Krueger & Krishna B. Kumar, 2004. "Skill-Specific rather than General Education: A Reason for US--Europe Growth Differences?," Journal of Economic Growth, Springer, vol. 9(2), pages 167-207, 06. [Downloadable!]
    Other versions:
  14. Ramon Gomez-Salvador & Alberto Musso & Marc Stocker & Jarkko Turunen, 2006. "Labour productivity developments in the euro area," Occasional Paper Series 53, European Central Bank. [Downloadable!]
  15. Eric A. Hanushek & Dennis D. Kimko, 2000. "Schooling, Labor-Force Quality, and the Growth of Nations," American Economic Review, American Economic Association, vol. 90(5), pages 1184-1208, December. [Downloadable!] (restricted)
  16. David Card & Richard B. Freeman, 2004. "What Have Two Decades of British Economic Reform Delivered?," NBER Chapters, in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, pages 9-62 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  17. Fosgerau, Mogens & Jensen, Svend E Hougaard & Sorensen, Anders, 2002. "Measuring Educational Heterogeneity and Labor Quality: A Note," Review of Income and Wealth, Blackwell Publishing, vol. 48(2), pages 261-69, June. [Downloadable!] (restricted)
  18. Alan B. Krueger & Mikael Lindahl, 2001. "Education for Growth: Why and for Whom?," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1101-1136, December. [Downloadable!] (restricted)
    Other versions:
  19. Jorgenson, Dale W., 2005. "Accounting for Growth in the Information Age," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 10, pages 743-815 Elsevier. [Downloadable!] (restricted)
  20. Giorgio Brunello, 2007. "The Effects of Cohort Size on European Earnings," "Marco Fanno" Working Papers 0036, Dipartimento di Scienze Economiche "Marco Fanno". [Downloadable!]
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