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Human Capital and Worker Productivity: Direct Evidence from Linked Employer-Employee Data

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  • John M. Abowd
  • Francis Kramarz

Abstract

The long literatures on the determinants of wage rates at the individual level and on the empirical relation between productivity and wage rates intersect when attention is focused on longitudinally linked employer-employee data. We estimate separate statistical components of wage rates associated with the observable individual characteristics, unobservable individual heterogeneity and unobservable employer heterogeneity. We define general human capital as the portable components of the full-time, full-year wage rate. Within each employer in the linked sample, we create employer-aggregates of the general human capital. We then estimate the relation between sales per employee, general human capital, and employer wage heterogeneity using micro data for the employing firms. The results reveal direct statistical links between the productivity outcome (sales/worker) and general human capital, controlling for firm-specific wage rate heterogeneity, which can be interpreted as specific human capital or as part of a firm-specific compensation strategy.

Suggested Citation

  • John M. Abowd & Francis Kramarz, 2005. "Human Capital and Worker Productivity: Direct Evidence from Linked Employer-Employee Data," Annals of Economics and Statistics, GENES, issue 79-80, pages 323-338.
  • Handle: RePEc:adr:anecst:y:2005:i:79-80:p:323-338
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    Cited by:

    1. David Card & Jörg Heining & Patrick Kline, 2013. "Workplace Heterogeneity and the Rise of West German Wage Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 128(3), pages 967-1015.
    2. Anneleen Vandeplas & Anna Thum-Thysen, 2019. "Skills Mismatch and Productivity in the EU," European Economy - Discussion Papers 2015 - 100, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    3. Susana Iranzo & Fabiano Schivardi & Elisa Tosetti, 2008. "Skill Dispersion and Firm Productivity: An Analysis with Employer-Employee Matched Data," Journal of Labor Economics, University of Chicago Press, vol. 26(2), pages 247-285, April.
    4. Navon, Guy, 2009. "Human Capital Spillovers in the Workplace: Labor Diversity and Productivity," MPRA Paper 17741, University Library of Munich, Germany.

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