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Mexico : human capital effects on wages and productivity

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  • Lopez-Acevedo, Gladys
  • Tinajero, Monica
  • Rubio, Marcela
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    Abstract

    The authors follow the Hellerstein, Neumark, and Troske (1999) framework to estimate marginal productivity differentials and compare them with estimated relative wages. The analysis provides evidence on productivity and nonproductivity-based determinations of wages. Special emphasis is given to the effects of human capital variables, such as education, experience, and training on wages and productivity differentials. Higher education yields higher productivity. However, highly educated workers earn less than their productivity differentials would predict. On average, highly educated workers are unable to fully appropriate their productivity gains of education through wages. On the other hand, workers with more experience are more productive in the same proportion that they earn more in medium and large firms, meaning they are fully compensated for their higher productivity. Finally, workers in micro and small firms are paid more than what their productivity would merit. Training benefits firms and employees since it significantly increases workers'productivity and their earnings.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3791.

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    Date of creation: 01 Dec 2005
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    Handle: RePEc:wbk:wbrwps:3791

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    Related research

    Keywords: Primary Education; Economic Theory&Research; Access&Equity in Basic Education; Labor Markets; Tertiary Education;

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    References

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    1. Bartel, Ann P & Lichtenberg, Frank R, 1987. "The Comparative Advantage of Educated Workers in Implementing New Technology," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 1-11, February.
    2. Verner, Dorte, 1999. "Are wages and productivity in Zimbabwe affected by human capital investment and international trade?," Policy Research Working Paper Series 2101, The World Bank.
    3. John Van Reenen, 2000. "Who gains when workers train? Training and corporate productivity in a panel of British industries," IFS Working Papers W00/04, Institute for Fiscal Studies.
    4. Sargent, John & Matthews, Linda, 1997. "Skill development and integrated manufacturing in Mexico," World Development, Elsevier, vol. 25(10), pages 1669-1681, October.
    5. Welch, F, 1970. "Education in Production," Journal of Political Economy, University of Chicago Press, vol. 78(1), pages 35-59, Jan.-Feb..
    6. Doms, Mark & Dunne, Timothy & Troske, Kenneth R, 1997. "Workers, Wages, and Technology," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 253-90, February.
    7. Hellerstein, J-K & Neumark, D, 1995. "Sex, Wages, and Productivity : an Empirical Analysis of Israeli, Firm-Level Data," Papers 9501, Michigan State - Econometrics and Economic Theory.
    8. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.
    9. Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-60, September.
    10. Erica L. Groshen, 1987. "The structure of the female/male wage differential: is it who you are, what you do, or where you work?," Working Paper 8708, Federal Reserve Bank of Cleveland.
    11. Maloney, William F. & Pontual Ribeiro, Eduardo, 1999. "Efficiency wage and union effects in labor demand and wage structure in Mexico - An application of quantile analysis," Policy Research Working Paper Series 2131, The World Bank.
    12. Alan Barrett & Philip J. O'Connell, 2001. "Does training generally work? The returns to in-company training," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(3), pages 647-662, April.
    13. Hellerstein, Judith K & Neumark, David & Troske, Kenneth R, 1999. "Wages, Productivity, and Worker Characteristics: Evidence from Plant-Level Production Functions and Wage Equations," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 409-46, July.
    14. Rosholm, Michael & Nielsen, Helena Skyt & Dabalen, Andrew, 2007. "Evaluation of training in African enterprises," Journal of Development Economics, Elsevier, vol. 84(1), pages 310-329, September.
    15. Revenga, Ana, 1995. "Employment and wage effects of trade liberalization : the case of Mexican manufacturing," Policy Research Working Paper Series 1524, The World Bank.
    16. Oosterbeek, Hessel & van Praag, Mirjam, 1995. " Firm-Size Wage Differentials in the Netherlands," Small Business Economics, Springer, vol. 7(3), pages 173-82, June.
    17. repec:fth:coluec:455 is not listed on IDEAS
    18. Jacob Mincer, 1989. "Human Capital Responses to Technological Change in the Labor Market," NBER Working Papers 3207, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Maliranta, Mika & Asplund, Rita, 2007. "Training and Hiring Strategies to Improve Firm Performance," Discussion Papers 1105, The Research Institute of the Finnish Economy.

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