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Human Capital Spillovers in the Workplace: Labor Diversity and Productivity

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  • Navon, Guy

Abstract

The paper studies the relationship between human capital spillovers and productivity using a unique longitudinal matched employer–employee dataset of Israeli manufacturing plants that contains individual records on all plant employees. I focus on the within-plant diversity of employees’ higher-education diplomas (university degrees). The variance decomposition shows that most knowledge diversity takes place within the industries. Using a semi-parametric approach, the study finds that hiring workers who are diversified in their specific knowledge is beneficial for plants’ productivity—the knowledge-diversity elasticity is about 0.2–0.25 and is robust—and that the benefit of knowledge diversity increase with the size of the plant. This suggests that for each allocation of labor in the production process it is beneficial for plants to diversify their skilled labor. The findings also suggest that the conventional way of estimating plant-level production function using Ordinary Least Squares or Fixed-Effects method is biased upward due to simultaneity of the inputs and the unobserved productivity shock.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17741.

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Date of creation: Jun 2009
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Handle: RePEc:pra:mprapa:17741

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Keywords: human capital; spillovers; within; firm; plant; guy; navon; pakes; levinsohn; petrin; poi; olley;

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Citations

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Cited by:
  1. Andrea Garnero & François Rycx, 2013. "The heterogeneous effects of workforce diversity on productivity, wages and profits," DULBEA Working Papers, ULB -- Universite Libre de Bruxelles 13-04, ULB -- Universite Libre de Bruxelles.
  2. Parrotta, Pierpaolo & Pozzoli, Dario & Pytlikova, Mariola, 2012. "Does Labor Diversity Affect Firm Productivity?," IZA Discussion Papers 6973, Institute for the Study of Labor (IZA).
  3. Marcos E. Domínguez Viera, 2011. "Does the Impact of Oportunidades Program Increases in Highly Competitive Regions?," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 79-111, November.
  4. Malchow-Møller, Nikolaj & Munch, Jakob R. & Skaksen, Jan Rose, 2011. "Do Foreign Experts Increase the Productivity of Domestic Firms?," IZA Discussion Papers 6001, Institute for the Study of Labor (IZA).
  5. Parrotta, Pierpaolo & Pozzoli, Dario & Pytlikova, Mariola, 2014. "Labor diversity and firm productivity," European Economic Review, Elsevier, Elsevier, vol. 66(C), pages 144-179.
  6. Pekka Ilmakunnas & Seija Ilmakunnas, 2011. "Diversity at the Workplace: Whom Does it Benefit?," De Economist, Springer, Springer, vol. 159(2), pages 223-255, June.
  7. Ryusuke Ihara & Shizu Yamamoto, 2012. "Does labor diversity cause agglomeration in Japan?: an NEG approach with a covariance structure analysis," ERSA conference papers ersa12p430, European Regional Science Association.
  8. Ceren Ozgen & Thomas de Graff, 2013. "Sorting out the impact of cultural diversity on innovative firms. An empirical analysis of Dutch micro-data," Norface Discussion Paper Series, Norface Research Programme on Migration, Department of Economics, University College London 2013012, Norface Research Programme on Migration, Department of Economics, University College London.

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