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The Contribution of Educated Workers to Firms' Efficiency Gains The Key Role of the Proximity to Frontier

Author

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  • Vincent Vandenberghe

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

Vandenbussche et al (2006), Aghion et al. (2009) posit and show that when economies operate close to the technical frontier, their ability to generate efficiency gains rests on the contribution of workers with advanced forms of education (i.e. those who attended tertiary education). The main originality of this empirical paper is to revisit and improve the analysis of that assumption in the context of firms located in advanced economics, assuming that something that has been verified for OECD countries or US states is likely to be observed also at a much more desegregated level. To that purpose, we analyse a rich panel of Belgian firm-level data, covering the 2008-14 period. In the first step, we concentrate on properly estimating each firm’s distance/proximity to frontier. Step 2 consists in regressing each firm's efficiency growth rate on [1] the share of workers by education attainment [2] its (initial) distance/proximity to the frontier and [3] (the main variable of interest here) the interaction between [1] & [2], whose sign provides a direct test of the Vandenbussche/Aghion assumption. The main result of the paper supports the idea that the closer the firms are from the frontier, the more educated workers matter for efficiency gains.

Suggested Citation

  • Vincent Vandenberghe, 2017. "The Contribution of Educated Workers to Firms' Efficiency Gains The Key Role of the Proximity to Frontier," LIDAM Discussion Papers IRES 2017012, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:2017012
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    References listed on IDEAS

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    More about this item

    Keywords

    Efficiency growth; Highly-educated workers; Frontier Firms; Proximity to frontier;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • I20 - Health, Education, and Welfare - - Education - - - General
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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