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Do Skill Shortages Reduce Productivity? Theory and Evidence from the United Kingdom

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  • Haskel, Jonathan
  • Martin, Christopher

Abstract

In this paper the authors examine the effect of skilled labor shortages on productivity in the UK. They develop a simple model that explains how skill shortages might reduce productivity and its rate of growth. Shortages may lead firms to substitute unskilled for skilled workers thereby reducing productivi ty. They may also leave the firm less able to bargain higher levels of effort from their workers. Using a panel data set of 81 industries, 1980-86, the authors find that the increase in skill shortages over the mid-1980s reduced UK productivity growth by around 0.7 percent p er annum. Had shortages risen by the EC average, productivity growth wo uld have been about 0.4 percent per annum higher. Copyright 1993 by Royal Economic Society.

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  • Haskel, Jonathan & Martin, Christopher, 1993. "Do Skill Shortages Reduce Productivity? Theory and Evidence from the United Kingdom," Economic Journal, Royal Economic Society, vol. 103(417), pages 386-394, March.
  • Handle: RePEc:ecj:econjl:v:103:y:1993:i:417:p:386-94
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    Cited by:

    1. Richard Fabling & David C. Maré, 2016. "Firm-Level Hiring Difficulties: Persistence, Business Cycle And Local Labour Market Influences," Journal of Labor Research, Springer, vol. 37(2), pages 179-210, June.
    2. Eichhorst, Werner & Colussi, Tommaso & Guzi, Martin & Kahanec, Martin & Lichter, Andreas & Nikolova, Milena & Sommer, Eric, 2017. "Report No. 74: People to Jobs, Jobs to People: Global Mobility and Labor Migration," IZA Research Reports 74, Institute for the Study of Labor (IZA).
    3. Mok, Penny & Mason, Geoff & Stevens, Philip & Timmins, Jason, 2012. "A Good Worker is Hard to Find: Skills Shortages in New Zealand Firms," Occasional Papers 12/5, Ministry of Economic Development, New Zealand.
    4. Schiersch, Alexander, 2016. "Considering the (Un)observed: temporary agency work in productivity estimations," Annual Conference 2016 (Augsburg): Demographic Change 145749, Verein für Socialpolitik / German Economic Association.
    5. John Schmitt, 1993. "The Changing Structure of Male Earnings in Britain," CEP Discussion Papers dp0122, Centre for Economic Performance, LSE.
    6. Sharma, Kishor & Oczkowski, Edward & Hicks, John, 2016. "Skill shortages in regional Australia: A local perspective from the Riverina," Economic Analysis and Policy, Elsevier, vol. 52(C), pages 34-44.
    7. Jajri, Idris & Ismail, Rahmah, 2007. "Source of output growth in small and medium scale enterprises in Malaysia," MPRA Paper 2779, University Library of Munich, Germany.
    8. Patricia Jones, 1994. "Are manufacturing workers really worth their pay?," Economics Series Working Papers WPS/1994-12, University of Oxford, Department of Economics.
    9. Alexander Schiersch, 2015. "TFP, Labor Productivity and the (Un)observed Labor Input: Temporary Agency Work," Discussion Papers of DIW Berlin 1532, DIW Berlin, German Institute for Economic Research.
    10. Jajri, Idris & Ismail, Rahmah, 2006. "Technical efficiency, technological change and total factor productivity growth in Malaysian manufacturing sector," MPRA Paper 1956, University Library of Munich, Germany.
    11. Muñoz-Bullón, Fernando, 2003. "Training provision and regulation: an analysis of the temporary help industry," DEE - Working Papers. Business Economics. WB wb035412, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
    12. Pablo Burriel-Llombart & Jonathan Thomas, 2001. "Skill imbalances in the UK labour market: 1979-99," Bank of England working papers 145, Bank of England.
    13. Bienvenido Ortega & Andrés Marchante, 2010. "Temporary contracts and labour productivity in Spain: a sectoral analysis," Journal of Productivity Analysis, Springer, vol. 34(3), pages 199-212, December.
    14. Ricardo de Avillez, 2014. "An Analysis of Productivity Trends in the Canadian Forest Products Sector, 2000-2012," International Productivity Monitor, Centre for the Study of Living Standards, vol. 27, pages 79-100, Fall.
    15. Healy, Joshua & Mavromaras, Kostas G. & Sloane, Peter J., 2011. "Adjusting to Skill Shortages: Complexity and Consequences," IZA Discussion Papers 6097, Institute for the Study of Labor (IZA).

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