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Human Capital Spillovers in the Workplace: Labor Diversity and Productivity

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Author Info
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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File URL: http://mpra.ub.uni-muenchen.de/17741/
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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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Related research
Keywords: human capital; spillovers; within; firm; plant; guy; navon; pakes; levinsohn; petrin; poi; olley;

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Find related papers by JEL classification:
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
J82 - Labor and Demographic Economics - - Labor Standards - - - Labor Force Composition

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  1. Navon, Guy, 2006. "Human Capital Heterogeneity: University Choice and Wages," MPRA Paper 9708, University Library of Munich, Germany. [Downloadable!]
  2. Kremer, Michael, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 551-75, August. [Downloadable!] (restricted)
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  6. Enrico Moretti, 2002. "Human Capital Spillovers in Manufacturing: Evidence from Plant-Level Production Functions," NBER Working Papers 9316, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Edward P. Lazear & Kathryn L. Shaw, 2007. "Personnel Economics: The Economist's View of Human Resources," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 91-114, Fall.
  8. Guy Navon & Ilan Tojerow, 2006. "The Effects of Rent-Sharing on the Gender Wage Gap in the Israeli Manufacturing Sector," IZA Discussion Papers 2361, Institute for the Study of Labor (IZA). [Downloadable!]
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  11. Federico Cingano & Fabiano Schivardi, 2004. "Identifying the Sources of Local Productivity Growth," Journal of the European Economic Association, MIT Press, vol. 2(4), pages 720-742, 06. [Downloadable!] (restricted)
    Other versions:
  12. Kremer, M & Maskin, E, 1996. "Wage Inequality and Segregation by Skill," Working papers 96-23, Massachusetts Institute of Technology (MIT), Department of Economics.
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  13. Jaffe, Adam B & Trajtenberg, Manuel & Henderson, Rebecca, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 577-98, August. [Downloadable!] (restricted)
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  14. Johannes Van Biesebroeck, 2003. "Wages Equal Productivity: Fact or Fiction?," NBER Working Papers 10174, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
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  16. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August. [Downloadable!] (restricted)
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  17. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-97, November. [Downloadable!] (restricted)
  18. Bregman, Arie & Fuss, Melvyn & Regev, Haim, 1991. "High tech and productivity: Evidence from Israeli industrial firms," European Economic Review, Elsevier, vol. 35(6), pages 1199-1221, August. [Downloadable!] (restricted)
  19. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor and Francis Journals, vol. 19(3), pages 321-340. [Downloadable!] (restricted)
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  20. Haltiwanger, John C. & Lane, Julia I. & Spletzer, James R., 2007. "Wages, productivity, and the dynamic interaction of businesses and workers," Labour Economics, Elsevier, vol. 14(3), pages 575-602, June. [Downloadable!] (restricted)
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  21. Edward P. Lazear, 1999. "Personnel Economics: Past Lessons and Future Directions," NBER Working Papers 6957, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  22. Harminder Battu & Clive R. Belfield & Peter J. Sloane, 2003. "Human Capital Spillovers within the Workplace: Evidence for Great Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(5), pages 575-594, December. [Downloadable!] (restricted)
  23. Luis Garicano & Esteban Rossi-Hansberg, 2006. "Organization and Inequality in a Knowledge Economy," The Quarterly Journal of Economics, MIT Press, vol. 121(4), pages 1383-1435, November. [Downloadable!] (restricted)
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