Advertisement

Journal of Productivity Analysis

, Volume 41, Issue 3, pp 399–417 | Cite as

Human capital contributions to explain productivity differences

  • Konstantinos Chatzimichael
  • Vangelis Tzouvelekas
Article

Abstract

This paper develops a parametric decomposition framework of labor productivity growth relaxing the assumption of labor-specific efficiency. The decomposition analysis is applied to a sample of 121 developed and developing countries during the 1970–2007 period drawn from the recently updated Penn World Tables and Barro and Lee (A new data set of educational attainment in the world 1950–2010. NBER Working Paper No. 15902, 2010) educational databases. A generalized Cobb–Douglas functional specification is used taking into account differences in technological structures across groups of countries to approximate aggregate production technology using Jorgenson and Nishimizu (Econ J 88:707–726, 1978) bilateral model of production. The measurement of labor efficiency is based on Kopp’s (Quart J Econ 96:477–503, 1981) orthogonal non-radial index of factor-specific efficiency modified in a parametric frontier framework. The empirical results indicate that the weighted average annual rate of labor productivity growth was 1.239 % over the period analyzed. Technical change was found to be the driving force of labor productivity, while improvements in human capital and factor intensities account for the 19.5 and 12.4 % of that productivity growth, respectively. Finally, labor efficiency improvements contributed by 9.8 % to measured labor productivity growth.

Keywords

Labor productivity Labor efficiency Multilateral modes of production Human capital 

JEL Classification

O47 O57 C23 

References

  1. Abramovitz M (1986) Catching up, forging ahead, and falling behind. J Econ Hist 46:385–406CrossRefGoogle Scholar
  2. Acemoglu D (1998) Why do new technologies complement skills? Directed technical change and wage inequality. Quart J Econ 113:1055–1090CrossRefGoogle Scholar
  3. Acemoglu D, Zilibotti F (2001) Productivity differences. Quart J Econ 116:563–606CrossRefGoogle Scholar
  4. Antle JM, Capalbo SM (1988) An introduction to recent development in production theory and productivity measurement. In: Capalbo SM, Antle JM (eds) Agricultural productivity: measurement and explanation, Resources for the future, Inc., Washington, DCGoogle Scholar
  5. Badunenko O, Hennderson DJ, Zelenyuk V (2008) Technological change and transition: relative contributions to worldwide growth during the 90s. Oxf Bull Econ Stat 70:461–492CrossRefGoogle Scholar
  6. Barro RJ, Lee JW (1993) International comparisons of educational attainment. J Monet Econ 32:363–394CrossRefGoogle Scholar
  7. Barro RJ, Lee JW (2010) A new data set of educational attainment in the world 1950–2010. NBER Working Paper No. 15902Google Scholar
  8. Basu S, Weil DN (1998) Appropriate technology and growth. Quart J Econ 113:1025–54CrossRefGoogle Scholar
  9. Black SE, Lynch LM (2001) How to compete: the impact of workplace practices and information technology on productivity. Rev Econ Stat 83:434–445CrossRefGoogle Scholar
  10. Blackorby C, Lovell CAK, Thursby MC (1976) Extended hicks neutral technological change. Econ J 86:845–52CrossRefGoogle Scholar
  11. Caselli F (2005) Accounting for cross-country income differences. In: Aghion P, Durlauf S (eds) Handbook of economic growth, Elsevier, AmsterdamGoogle Scholar
  12. Cornwell C, Schmidt P, Sickles RC (1990) Production frontiers with cross-sectional and time-series variation in efficiency levels. J Econ 46:185–200CrossRefGoogle Scholar
  13. Fan S (1991) Effects of technological change and institutional reform on production growth in chinese agriculture. Am J Agric Econ 73:266–275CrossRefGoogle Scholar
  14. Färe R, Grosskopf S, Noris M, Zhang Z (1994) Productivity growth, technical progress and efficiency change in industrialized countries. Am Econ Rev 84:66–83Google Scholar
  15. Gollin D (2002) Getting income shares right. J Polit Econ 110:458–474CrossRefGoogle Scholar
  16. Griliches Z (1963) Estimates of the aggregate agricultural production function from cross-sectional data. J Farm Econ XLV:1411–27Google Scholar
  17. Griliches Z (1964) Research expenditures, education, and the aggregate agricultural production function. Am Econ Rev 961(LIV):961–974Google Scholar
  18. Griliches Z (1970) Notes on the role of education in production functions and growth accounting. In: Hansen WL (ed) Education, income and human capital, National Bureau of Economic Research, New YorkGoogle Scholar
  19. Hall RE, Jones CI (1999) Why do some countries produce so much more output per worker than others?. Quart J Econ 114:83–116CrossRefGoogle Scholar
  20. Harberger A (1978) Perspectives on capital and technology in less developed countries. In: Artis MJ, Nobay AR (eds) Contemporary economic analysis, Croom Helm, LondonGoogle Scholar
  21. Helpman E, Itskhoki O (2010) Labor market rigidities, trade and unemployment. Rev Econ Stud 77:1100–37CrossRefGoogle Scholar
  22. Henderson DJ, Russell RR (2005) Human capital and convergence: a production frontier approach. Int Econ Rev 46:1167–05CrossRefGoogle Scholar
  23. Hsieh CT (2002) What explains the industrial revolution in east asia? Evidence from the factor markets. Am Econ Rev 92:502–526CrossRefGoogle Scholar
  24. Ichniowski C, Shaw K, Prennushi G (1997) The effects of human resource management practices on productivity: a study of steel finishing lines. Am Econ Rev 87:291–313Google Scholar
  25. Jorgenson DW, Nishimizu M (1978) US and Japanese economic growth, 1952–1974: an international comparison. Econ J 88:707–726CrossRefGoogle Scholar
  26. Ketteni E, Mamuneas T, Stengos T (2011) The effect of IT and human capital on economic growth. Macroecon Dyn 15:595–615CrossRefGoogle Scholar
  27. Kopp RJ (1981) The measurement of productive efficiency: a reconsideration. Quart J Econ 96:477–503CrossRefGoogle Scholar
  28. Krusell P, Rios-Rull JV (1996) Vested interests in a positive theory of stagnation and economic growth. Rev Econ Stud 63:301–329CrossRefGoogle Scholar
  29. Kumar S, Russell RR (2002) Technological change, technological catch-up, and capital deepening: relative contributions to growth and convergence. Am Econ Rev 92:527–548CrossRefGoogle Scholar
  30. Kuroda Y (1987) The production structure and demand for labor in postwar Japanese agriculture. Am J Agric Econ 69:326–337CrossRefGoogle Scholar
  31. Kuroda Y (1995) Labor productivity measurement in Japanese agriculture, 1956–1990. Agric Econ 12:55–68CrossRefGoogle Scholar
  32. Los B, Timmer MP (2005) The appropriate technology explanation of productivity growth: an empirical approach. J Dev Econ 77:517–531CrossRefGoogle Scholar
  33. Maddison A, Wu HX (2008) Measuring China’s economic performance. World Econ 9:13–44Google Scholar
  34. Mamuneas T, Savvides A, Stengos T (2006) Economic development and the return to human capital: a smooth coefficient semiparametric approach. J Appl Econ 21:111–132CrossRefGoogle Scholar
  35. Nehru V, Swanson E, Dubey A (1995) A new database on human capital stock in developing and industrial countries: sources, methodology and results. J Dev Econ 46:379–401CrossRefGoogle Scholar
  36. Olley GS, Pakes A (1996) The dynamics of productivity in the telecommunications equipment industry. Econometrica 64:1263–97CrossRefGoogle Scholar
  37. Olson M (1982) The rise and decline of nations: economic growth, stagflation and social rigidities. Yale University Press, New Haven, CTGoogle Scholar
  38. Parente SL, Prescott EC (1999) Monopoly rights: a barrier to riches. Am Econ Rev 89:1216–33CrossRefGoogle Scholar
  39. Politis D, Romano J (1994) Large sample confidence regions based on subsamples under minimal assumptions. Ann Stat 22:2031–2050CrossRefGoogle Scholar
  40. Psacharopoulos G (1994) Returns to investment in education: a global update. World Dev 22:1325–43CrossRefGoogle Scholar
  41. Schmidt P, Sickles RC (1984) Production frontiers and panel data. J Bus Econ Stat 2:367–374Google Scholar
  42. Simar L (2003) Detecting outliers in frontier models: a simple approach. J Prod Anal 20:391–424CrossRefGoogle Scholar
  43. Solow RM (1957) Technical change and the aggregate production function. Rev Econ Stat 39:312–320CrossRefGoogle Scholar
  44. Welch F (1970) Education in production. J Polit Econ 80:35–59CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  • Konstantinos Chatzimichael
    • 1
  • Vangelis Tzouvelekas
    • 2
  1. 1.Deptartment of Commerce, Finance and Shipping, Faculty of Management and EconomicsCyprus University of TechnologyLimassolCyprus
  2. 2.Department of Economics, Faculty of Social SciencesUniversity of CreteRethymno, CreteGreece

Personalised recommendations