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Human capital contributions to explain productivity differences

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  • Konstantinos Chatzimichael

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  • Vangelis Tzouvelekas

Abstract

This paper develops a parametric decomposition framework of labor productivity growth relaxing the assumption of labor-specific efficiency. The decomposition analysis is applied to a sample of 121 developed and developing countries during the 1970–2007 period drawn from the recently updated Penn World Tables and Barro and Lee (A new data set of educational attainment in the world 1950–2010. NBER Working Paper No. 15902, 2010 ) educational databases. A generalized Cobb–Douglas functional specification is used taking into account differences in technological structures across groups of countries to approximate aggregate production technology using Jorgenson and Nishimizu (Econ J 88:707–726, 1978 ) bilateral model of production. The measurement of labor efficiency is based on Kopp’s (Quart J Econ 96:477–503, 1981 ) orthogonal non-radial index of factor-specific efficiency modified in a parametric frontier framework. The empirical results indicate that the weighted average annual rate of labor productivity growth was 1.239 % over the period analyzed. Technical change was found to be the driving force of labor productivity, while improvements in human capital and factor intensities account for the 19.5 and 12.4 % of that productivity growth, respectively. Finally, labor efficiency improvements contributed by 9.8 % to measured labor productivity growth. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Konstantinos Chatzimichael & Vangelis Tzouvelekas, 2014. "Human capital contributions to explain productivity differences," Journal of Productivity Analysis, Springer, vol. 41(3), pages 399-417, June.
  • Handle: RePEc:kap:jproda:v:41:y:2014:i:3:p:399-417
    DOI: 10.1007/s11123-013-0355-x
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    More about this item

    Keywords

    Labor productivity; Labor efficiency; Multilateral modes of production; Human capital; O47; O57; C23;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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