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Why do South Korean firms produce so much more output per worker than Ghanaian ones?

  • Simon Baptist
  • Francis Teal

The labour productivity differentials between manufacturing firms in Ghana and South Korea exceed those implied by macro analysis. Median value-added per employee is nearly 40 times higher in South Korea than Ghana. The most important single factor in explaining this difference is the Mincerian return to skills which differ by a factor of three between Ghana and South Korea. There is no significant difference in total factor productivity across the countries once we allow for human capital. Our results are consistent with those who have argued that rises in the return to education within developed countries can be explained by skill-biased technical progress in those economies. They are also consistent with work in developing countries which finds a convex return to education based on individual labour market data. Allowing for differences in the shape of the relationship between productivity and human capital across countries is crucial for understanding the role of human capital in increasing productivity.

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Paper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 2008-10.

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Date of creation: 2008
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Handle: RePEc:csa:wpaper:2008-10
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  1. Hallward-Driemeier, Mary, 2001. "Firm-level survey provides data on Asia's corporate crisis and recovery," Policy Research Working Paper Series 2515, The World Bank.
  2. Mary Hallward-Driemeier & Giuseppe Iarossi & Kenneth L. Sokoloff, 2002. "Exports and Manufacturing Productivity in East Asia: A Comparative Analysis with Firm-Level Data," NBER Working Papers 8894, National Bureau of Economic Research, Inc.
  3. Måns Söderbom & Francis Teal, 2004. "Size and Efficiency in African Manufacturing Firms:Evidence from Firm-Level Panel Data," Development and Comp Systems 0409010, EconWPA.
  4. Jonathan Temple, 2005. "Dual Economy Models: A Primer For Growth Economists," Manchester School, University of Manchester, vol. 73(4), pages 435-478, 07.
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