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Human Capital Spillovers in the Workplace: Labor Diversity and Productivity

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  • Guy Navon

    () (Bank of Israel)

Abstract

The paper studies the relationship between human capital spillovers and productivity using a unique longitudinal matched employer-employee dataset of Israeli manufacturing plants that contains individual records on all plant employees. I focus on the within-plant diversity of employees' higher-education diplomas (university degrees). The variance decomposition shows that most knowledge diversity takes place within the industries. Using a semi-parametric approach, the study finds that hiring workers who are diversified in their specific knowledge is beneficial for plants' productivity-the knowledge-diversity elasticity is about 0.2-0.25 and is robust-and that the benefit of knowledge diversity increase with the size of the plant. This suggests that for each allocation of labor in the production process it is beneficial for plants to diversify their skilled labor. The findings also suggest that the conventional way of estimating plant-level production function using Ordinary Least Squares or Fixed-Effects method is biased upward due to simultaneity of the inputs and the unobserved productivity shock.

Suggested Citation

  • Guy Navon, 2009. "Human Capital Spillovers in the Workplace: Labor Diversity and Productivity," Bank of Israel Working Papers 2009.05, Bank of Israel.
  • Handle: RePEc:boi:wpaper:2009.05
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    File Function: First version, 2009
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    Cited by:

    1. Andrea Garnero, 2015. "Workforce diversity, productivity and wages in France: the role of managers vs. the proprietary structure of the firm," Working Papers CEB 15-039, ULB -- Universite Libre de Bruxelles.

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