Productivity and human capital: a business-level analysis

This paper aims to analyse the impact of human capital on business productivity, focusing the analysis on the possible effect of the complementarity that exists between human capital and new production technologies, particularly advanced manufacturing technologies (AMTs) for the specific case of small and medium enterprises (SMEs) in Catalonia. Additionally, following the theory of skill-biased technological change, the paper analyses whether technological change produces bias exclusively in the skills required for managers, or whether the bias extends to the skills required of production staff. With this objective, we have compared the possible existence of complementarity between AMTs and the level of human capital for different occupational groups. The results confirm the complementary relationship between human capital and new production technologies. The results by occupational group confirm that to maximise the productivity of new technologies, skilled staff are needed both in management and production, with managers and professionals as well as skilled operatives playing a vital role. Keywords: human capital, process technologies, complementarity, business productivity. (JEL D24, J24, O30).

Long-run substitutability between more and less educated workers: Evidence from U.S. States 1950-1990

We estimate the aggregate long-run elasticity of substitution between more and less educatedworkers (the slope of the demand curve for more relative to less educated workers) at theUS state level. Our data come from the (five)1950-1990 decennial censuses. Our empiricalapproach allows for state and time fixed effects and relies on time and state dependentchild labor and compulsory school attendance laws as instruments for (endogenous) changesin the relative supply of more educated workers. We find the aggregate long-run elasticity ofsubstitution between more and less educated workers to be around 1.5.

The determinants of capital intensity in Japan and the U.S

We estimate the determinants of capital intensity in Japan and the US, characterized by striking different paths. We augment an otherwise standard Constant Elasticity of Substitution (CES) model with demand-side considerations, which we find especially relevant in the US. In this augmented setting, the elasticity of substitution between capital and labor is placed around 0.85 in Japan, and 0.30 in the US. We also find evidence of biased technical change, which is capital-saving in Japan but labor-saving in the US. These differences help us explain the diverse experience in the capital deepening process of these economies, and lead us to conclude that demand-side drivers may also be relevant to account for different growth experiences. A close look at the nature of technological change is also needed before designing one-size-fits-all industrial, economic growth, and/or labor market policies.

Does the growth in higher education mean a decline in the quality of degrees? CEPS Working Document No. 405/March 2015

In this paper the authors construct a theory about how the expansion of higher education could be associated with several factors that indicate a decline in the quality of degrees. They assume that the expansion of tertiary education takes place through three channels, and show how these channels are likely to reduce average study time, lower academic requirements and average wages, and inflate grades. First, universities have an incentive to increase their student body through public and private funding schemes beyond a level at which they can keep their academic requirements high. Second, due to skill-biased technological change, employers have an incentive to recruit staff with a higher education degree. Third, students have an incentive to acquire a college degree due to employers’ preferences for such qualifications; the university application procedures; and through the growing social value placed on education. The authors develop a parsimonious dynamic model in which a student, a college and an employer repeatedly make decisions about requirement levels, performance and wage levels. Their model shows that if i) universities have the incentive to decrease entrance requirements, ii) employers are more likely to employ staff with a higher education degree and iii) all types of students enrol in colleges, the final grade will not necessarily induce weaker students to study more to catch up with more able students. In order to re-establish a quality-guarantee mechanism, entrance requirements should be set at a higher level.

Essays on Macroeconomic Trends and Cycles

This dissertation describes two studies on macroeconomic trends and cycles. The first chapter studies the impact of Information Technology (IT) on the U.S. labor market. Over the past 30 years, employment and income shares of routine-intensive occupations have declined significantly relative to nonroutine occupations, and the overall U.S. labor income share has declined relative to capital. Furthermore, the decline of routine employment has been largely concentrated during recessions and ensuing recoveries. I build a model of unbalanced growth to assess the role of computerization and IT in driving these labor market trends and cycles. I augment a neoclassical growth model with exogenous IT progress as a form of Routine-Biased Technological Change (RBTC). I show analytically that RBTC causes the overall labor income share to follow a U-shaped time path, as the monotonic decline of routine labor share is increasingly offset by the monotonic rise of nonroutine labor share and the elasticity of substitution between the overall labor and capital declines under IT progress. Quantitatively, the model explains nearly all the divergence between routine and nonroutine labor in the period 1986-2014, as well as the mild decline of the overall labor share between 1986 and the early 2000s. However, the model with IT progress alone cannot explain the accelerated decline of labor income share after the early 2000s, suggesting that other factors, such as globalization, may have played a larger role in this period. Lastly, when nonconvex labor adjustment costs are present, the model generates a stepwise decline in routine labor hours, qualitatively consistent with the data. The timing of these trend adjustments can be significantly affected by aggregate productivity shocks and concentrated in recessions. The second chapter studies the implications of loss aversion on the business cycle dynamics of aggregate consumption and labor hours. Loss aversion refers to the fact that people are distinctively more sensitive to losses than to gains. Loss averse agents are very risk averse around the reference point and exhibit asymmetric responses to positive and negative income shocks. In an otherwise standard Real Business Cycle (RBC) model, I study loss aversion in both consumption alone and consumption-and-leisure together. My results indicate that how loss aversion affects business cycle dynamics depends critically on the nature of the reference point. If, for example, the reference point is status quo, loss aversion dramatically lowers the effective inter-temporal rate of substitution and induces excessive consumption smoothing. In contrast, if the reference point is fixed at a constant level, loss aversion generates a flat region in the decision rules and asymmetric impulse responses to technology shocks. Under a reasonable parametrization, loss aversion has the potential to generate asymmetric business cycles with deeper and more prolonged recessions.

The Drivers of Wage Inequality Across Europe: A Recentered Influence Function Regression Approach

This study analyzes the impact of individual characteristics as well as occupation and industry on male wage inequality in nine European countries. Unlike previous studies, we consider regression models for five inequality measures and employ the recentered influence function regression method proposed by Firpo et al. (2009) to test directly the influence of covariates on inequality. We conclude that there is heterogeneity in the effects of covariates on inequality across countries and throughout wage distribution. Heterogeneity among countries is more evident in education and experience whereas occupation and industry characteristics as well as holding a supervisory position reveal more similar effects. Our results are compatible with the skill biased technological change, rapid rise in the integration of trade and financial markets as well as explanations related to the increase of the remunerative package of top executives.

Directed Technical Change and International Trade

Recent changes in comparative advantage in the largest OECD economies differ significantly from the predictions of Heckscher-Ohlin-Vanek theory. Japan's rising share of OECD machinery exports and the improvement in the comparative advantage of the USA and Germany in heavy industry were accompanied by growing scarcities of the factors used intensively in the favored sector of each country. Here we examine Acemoglu's (1998, 2002) hypothesis that technical change may be directed toward raising the marginal productivity of abundant factors. Testing this hypothesis with 1970-1992 export data from 14 OECD countries, we find evidence that international comparative advantage was reshaped by innovation biased toward the abundant factors in the largest economies.

Dual technological development in Botswana agriculture: A Stochastic input distance function approach

To improve the welfare of the rural poor and keep them in the countryside, the government of Botswana has been spending 40% of the value of agricultural GDP on agricultural support services. But can investment make smallholder agriculture prosperous in such adverse conditions? This paper derives an answer by applying a two-output six-input stochastic translog distance function, with inefficiency effects and biased technical change to panel data for the 18 districts and the commercial agricultural sector, from 1979 to 1996 This model demonstrates that herds are the most important input, followed by draft power. land and seeds. Multilateral indices for technical change, technical efficiency and total factor productivity (TFP) show that the technology level of the commercial agricultural sector is more than six times that of traditional agriculture and that the gap has been increasing, due to technological regression in traditional agriculture and modest progress in commercial agriculture. Since the levels of efficiency are similar, the same patient is repeated by the TFP indices. This result highlights the policy dilemma of the trade-off between efficiency and equity objectives.

Structural change and domestic technological capabilities

Includes bibliography

Building a knowledge and learning society in Portugal: adult students in technological schools and higher education institutions

Lifelong learning (LLL) has received increasing attention in recent years. It implies that learning should take place at all stages of the “life cycle and it should be life-wide, that is embedded in all life contexts from the school to the work place, the home and the community” (Green, 2002, p.613). The ‘learning society’, is the vision of a society where there are recognized opportunities for learning for every person, wherever they are and however old they happen to be. Globalization and the rise of new information technologies are some of the driving forces that cause depreciation of specialised competences. This happens very quickly in terms of economic value; consequently, workers of all skills levels, during their working life, must have the opportunity to update “their technical skills and enhance general skills to keep pace with continuous technological change and new job requirements” (Fahr, 2005, p. 75). It is in this context that LLL tops the policy agenda of international bodies, national governments and non-governmental organizations, in the field of education and training, to justify the need for LLL opportunities for the population as they face contemporary employability challenges. It is in this context that the requirement and interest to analyse the behaviour patterns of adult learners has developed over the last few years

Innovation and environmental policy: Clean vs. dirty technical change

We study a two sector endogenous growth model with environmental quality with two goods and two factors of production, one clean and one dirty. Technological change creates clean or dirty innovations. We compare the laissez-faire equilibrium and the social optimum and study first- and second-best policies. Optimal policy encourages research toward clean technologies. In a second-best world, we claim that a portfolio that includes a tax on the polluting good combined with optimal innovation subsidy policies is less costly than increasing the price of the polluting good alone. Moreover, a discriminating innovation subsidy policy is preferable to a non-discriminating one.

Technological convergence: a strategic perspective

The information and communication technologies (ICT) sectors are in a process of technological convergence. Determinant factors in this process are the liberalisation of the telecommunications markets and technological change. Many firms are engaged in a process of mergers and alliances to position themselves in this new framework. Technological and demand uncertainties are very important. Our objective in this paper is to study the economic determinants of the strategies of the firms. With this aim, we review some key technological and demand aspects. We shed some light on the strategic motivations of the firms by establishing a parallel with the evolution of the retailing sector

Upgrading or polarization? occupational change in Britain, Germany, Spain and Switzerland, 1990-2008

This paper analyzes the pattern of occupational change in four Western European countries over the last two decades: what kind of jobs have been expanding -- high-paid jobs, low-paid jobs or both? By addressing this issue, we also examine what theoretical account is consistent with the observed pattern of change: skill-biased technical change, skill supply evolution or wage-setting institutions? Our empirical findings show a picture of massive occupational upgrading that closely matches educational expansion. In all four countries, by far the strongest employment growth occurred at the top of the occupational hierarchy, among managers and professionals. Yet in parallel, in Britain and Switzerland, as well as in Germany and Spain after 1996 and 2002 respectively, relative employment declined more strongly in the middling occupations (among clerks and production workers) than at the bottom (among interpersonal service workers). This slightly polarized pattern of occupational upgrading is consistent with the "routinization" hypothesis that technology is a better substitute for average-paid jobs in production and the office that for low-paid jobs in interpersonal services. However, we find large cross-country differences in the employment evolution at the bottom of the occupational hierarchy, among low-paid services workers: sizeable growth in Britain and Spain, but stagnation in Germany and Switzerland. This results points towards the possibility that wage-setting institutions filter the pattern of occupational change.

The Impact of Trade on Technology and Skill Upgrading Evidence from Argentina

In the last 20 years, wage inequality has increased in many developing countries. Most research on this topic focuses on two alternative causes: trade or skill-biased technical change. Several empirical studies in both developed and developing countries document increases in skill intensity within all sectors, favoring the technological change explanation over trade. Instead, I present and test a model where bilateral trade liberalization increases exporting revenues inducing more firms to enter the export market and to adopt skilled-biased new technologies. I find that the increase in the relative demand of skilled labor does not come from labor reallocation across sectors or firms but from skill upgrading within firms. Firms that upgrade technology faster also upgrade skill faster. Finally, firms entering the export market after liberalization become more skill and technology-intensive than non exporters.

Offshoring and directed technical change

To study the short-run and long-run implications on wage inequality, we introducedirected technical change into a Ricardian model of offshoring. A unique final good isproduced by combining a skilled and an unskilled product, each produced from a continuumof intermediates (tasks). Some of these tasks can be transferred from a skill-abundant Westto a skill-scarce East. Profit maximization determines both the extent of offshoring andtechnological progress. Offshoring induces skill-biased technical change because it increasesthe relative price of skill-intensive products and induces technical change favoring unskilledworkers because it expands the market size for technologies complementing unskilled labor.In the empirically more relevant case, starting from low levels, an increase in offshoringopportunities triggers a transition with falling real wages for unskilled workers in the West,skill-biased technical change and rising skill premia worldwide. However, when the extentof offshoring becomes sufficiently large, further increases in offshoring induce technicalchange now biased in favor of unskilled labor because offshoring closes the gap betweenunskilled wages in the West and the East, thus limiting the power of the price effectfueling skill-biased technical change. The unequalizing impact of offshoring is thus greatestat the beginning. Transitional dynamics reveal that offshoring and technical change aresubstitutes in the short run but complements in the long run. Finally, though offshoringimproves the welfare of workers in the East, it may benefit or harm unskilled workers inthe West depending on elasticities and the equilibrium growth rate.