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Productivity and the Allocation of Skills


  • David C Maré

    () (Motu Economic and Public Policy Research)

  • Trinh Le

    () (Motu Economic and Public Policy Research)

  • Richard Fabling

    () (Independent Researcher)

  • Nathan Chappell

    () (Motu Economic and Public Policy Research)


We use linked employer-employee data from 2004–2012, combined with individual qualifications data from 1994–2012, to study how graduates with different skills fare in the labour market in the six years after studying. We find that graduates experience improvements in earnings, and that they systematically move between jobs, industries and locations in a pattern that is consistent with their securing better job matches, particularly for high level STEM graduates. We then estimate joint production function and wage equations to see how the skill composition of a firm’s employees correlates with productivity, and compare this with how the skill composition correlates with its wage bill. Our results suggest that degree graduates make a growing positive contribution to production in the six years after graduation, with associated wage growth. There is variation in relative productivity and wages across groups of graduates that differ by field of study and level of qualification.

Suggested Citation

  • David C Maré & Trinh Le & Richard Fabling & Nathan Chappell, 2017. "Productivity and the Allocation of Skills," Working Papers 17_04, Motu Economic and Public Policy Research.
  • Handle: RePEc:mtu:wpaper:17_04

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    References listed on IDEAS

    1. repec:taf:nzecpp:v:51:y:2017:i:3:p:302-326 is not listed on IDEAS
    2. Walker, Ian & Zhu, Yu, 2011. "Differences by degree: Evidence of the net financial rates of return to undergraduate study for England and Wales," Economics of Education Review, Elsevier, vol. 30(6), pages 1177-1186.
    3. Judith K. Hellerstein & David Neumark, 1995. "Are Earnings Profiles Steeper Than Productivity Profiles? Evidence from Israeli Firm-Level Data," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 89-112.
    4. David C Mare & Lynda Sanderson & Richard Fabling, 2014. "Earnings and Employment in Foreign-owned Firms," Treasury Working Paper Series 14/16, New Zealand Treasury.
    5. Robert H. Topel & Michael P. Ward, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 439-479.
    6. Hellerstein, Judith K & Neumark, David & Troske, Kenneth R, 1999. "Wages, Productivity, and Worker Characteristics: Evidence from Plant-Level Production Functions and Wage Equations," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 409-446, July.
    7. David C. Maré & Yun Liang, 2006. "Labour Market Outcomes for Young Graduates," Working Papers 06_06, Motu Economic and Public Policy Research.
    8. David C. Maré & Dean R. Hyslop & Richard Fabling, 2017. "Firm productivity growth and skill," New Zealand Economic Papers, Taylor & Francis Journals, vol. 51(3), pages 302-326, September.
    9. Peri, Giovanni & Shih, Kevin Y., 2013. "Foreign Scientists and Engineers and Economic Growth in Canadian Labor Markets," IZA Discussion Papers 7367, Institute for the Study of Labor (IZA).
    10. Giovanni Peri & Kevin Shih & Chad Sparber, 2016. "STEM Workers, H-1B Visas, and Productivity in US Cities," World Scientific Book Chapters,in: The Economics of International Migration, chapter 9, pages 277-307 World Scientific Publishing Co. Pte. Ltd..
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    More about this item


    Firm productivity; linked employer-employee data; skill matching; STEM;

    JEL classification:

    • D29 - Microeconomics - - Production and Organizations - - - Other
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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