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Productivity Gap between Tradable and Non-Tradable Industries and Duality in Higher Education

Author

Listed:
  • Elise S. Brezis

    (Bar-Ilan University)

  • Gilad Brand

Abstract

Over the last decades, productivity in the tradable sector rose substantially, while in the non-tradable sector, output per worker has remained the same, despite a similar increase in human capital in both sectors. This paper emphasizes that duality in higher education as well as heterogeneous ability of individuals can explain the differences in labor productivity between tradable and non-tradable industries. The duality in the higher-education sector enables a separation of individuals by their ability, and in consequence, human capital in both industries is different. The heterogeneity in human capital can explain that despite an increase in human capital in both sectors, there is still a gap in productivity. In other words, the productivity gap between tradable and non-tradable sectors is fueled by the duality in higher education, leading to heterogeneity in human capital. In consequence, there is a contrast between on one hand, more mobility across countries, and on the other hand, less mobility between sectors.

Suggested Citation

  • Elise S. Brezis & Gilad Brand, 2017. "Productivity Gap between Tradable and Non-Tradable Industries and Duality in Higher Education," Working Papers 2017-10, Bar-Ilan University, Department of Economics.
    • Handle: RePEc:biu:wpaper:2017-10
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    More about this item

    Keywords

    ability; skills; productivity; tradable goods; services; duality; higher education; human capital; wage premium.;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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