Measurement of labor quality growth caused by unobservable characteristics
The standard economy-wide indices of labor quality (or human capital) largely ignore the role of unobservable worker characteristics. In this paper, we develop a methodology for identifying the contri- butions of both observable and unobservable worker characteristics in the presence of the incidental parameter problem. Based on data for Switzerland over the period 1991-2006, we find that a large part of growth in labor quality is caused by shifts in the distribution of un- observable characteristics. The contributions to growth attributed to education and age are corrected downwards, if unobservable worker characteristics are taken into account. Yet the standard indices of la- bor quality appear to be robust to this extension.
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"High-Wage Workers and High-Wage Firms,"
Cahiers de recherche
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- Lancaster, Tony, 2000. "The incidental parameter problem since 1948," Journal of Econometrics, Elsevier, vol. 95(2), pages 391-413, April.
- Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier.
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"Measuring Growth of Labor Quality and the Quality-Adjusted Unemployment Rate in Switzerland,"
Applied Economics Quarterly (formerly: Konjunkturpolitik),
Duncker & Humblot, Berlin, vol. 55(2), pages 121-145.
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- John M. Abowd & Paul A. Lengermann & Kevin L. McKinney, 2002. "The Measurement of Human Capital in the U.S. Economy," Longitudinal Employer-Household Dynamics Technical Papers 2002-09, Center for Economic Studies, U.S. Census Bureau, revised Mar 2003.
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