Human Capital Creation in an Economic Perspective

Transcription

1 Human Capital Creation in an Economic Perspective

2 ETLA -The Research Institute of the Finnish Economy Series B102 (ISSN ) The Research Institute ofthe Finnish Economy (ETLA) was founded in 1946 to conduct research in the fields of economics, business and social policy designed to serve financial and economic-policy decision making. At present the members ofthe association sponsoring ETLA are the central association of industry and employers, major banks and the central association of insurance companies. ETLAalso conducts special studies financed from sources outside the association,forwhich a separate unit has been established. ETLA publishes monographs, reviews and forecasts in several ditterent series. Address: ETLA, LOnnrotinkatu 4 B, FIN Helsinki, Finland Telephone Telefax Previous Volumes Published in Association with ETLA, Helsinki Synnove Vuori and Pentti Vuorinen (Eds.) Explaining Technical Change in a Small Country

3 Rita Asplund (Ed.) Human Capital Creation man Economic Perspective With 20 Figures Springer-Verlag Berlin Heidelberg GmbH

4 Dr. Rita Asplund ETLA The Research Institute ofthe Finnish Economy LOnnrotinkatu 4 B FIN Helsinki Finland ISBN ISBN (ebook) DOI / This work is subject to copyright. Ali rights are reserved, whetherthewhole orpart ofthe material is concemed, specifically the rights oftranslation, reprinting, reuse of iiiustrations, recitation, broadcasting, reproduction on microfilms or in other ways, and storage in data banks. Duplication of this publication orparts thereofis only permitted underthe provisions ofthe German Copyright Lawof September9, 1965, in its version ofjune 24, 1985,and a copyright fee must always be paid. Violations fali under the prosecution act of the German Copyright Law. Springer-Verlag Berlin Heidelberg 1994 Urspriinglich erschienen bei Physica-Verlag Heidelberg 1994 The use of registered narnes, trademarks,etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. 88/ l 0-Printed on acid-free paper

5 FOREWORD The past few decades have seen a revolutionary increase in interest in the economic role of education and training at the societal, business, and individual levels. This is mainly due to the strong post-war growth in industrialized economies, which has been driven by rapid technological progress and far-reaching structural change and, in the end, has resulted in increasingly skill-intensive production and growing demandfor more educated labour. Today it is frequently argued that with the increasing importance of the role of know-how, the workforce has become the most important single input in the production process. Simultaneously the dramatic increase in the availability of large micro-ievel databases has opened enormous possibilities to study the economic role of human capital creation also empirically. The economic perspective of human capital accumulation is, however, of utmost importance also in times of deep economic recession. Periods of economic slowdown and rapidly increasing unemployment tend to in crease the demandfor advanced education and training in particular. This brings up, in turn, questions regarding overeducation and satisfying both private and social retums on investments in human capital. The ongoing recession in combination with falling tax revenues has forced economies with large public sectors to decide on cutbacks and reallocations of educational expenses. But at the same time it may be questioned whether it is reasonable to undertake deep-going measures in order to improve the efficiency in education without having reliable information on the macro- and microeconomic effects ofthe vast resources annually expended on education and training. Investment in human capital at ali levels of the society is a question of generations, not of business cycles. With these points in mind a seminar on human capital creation in an economic perspective was held on May 14-15, 1992 in Helsinki. The main purpose of the seminar was to shed as much light as possible on the economic role of investment in human capital at the individual, firm and macroeconomic levels. Researchers, mainly from the Nordic countries, were invited to present theoretical and empirical results from their ongoing research projects in these particular fields. The papers presented at the seminar spurred lively discussions and have, hopefully, also stimulated the research on the important topic of human capital not least within and across the Nordic countries. Because of the wide scope of crucial human capital-related topics covered at the seminar, it was considered worthwhile to make this information available to a broader audience by publishing up-dated versions ofmost ofthe presentations given at the seminar. 1 am much indebted to seve rai persons for help in arranging the seminar and in produc ing this book. Pentti Vartia was the initiator of the project. John Rogers has checked and improved the language ofthe chapters by non-english speaking contributers. The final layout of the book was produced by Public Design Oy.

6 VI Financial support from the Ministry of Education and the Yrjo Jahnsson Foundation is gratefully acknowledged. Helsinki, May 1994 Rita Asplund

7 Contents 1 Introductiou aud Summary... 1 Rita Asplund 1.1 Human Capital and Individual Earnings Academic Competencies, Productivity and Earnings Educational Retums, Family Background and Earnings Differentials Competence Building in the Labour Market Workplace Skill Accumulation, Earnings and Labour Mobility Lifelong Learning Human Capital and Economic Performance Schooling, Learniug aud Worker Productivity John Bishop 2.1 Introduction The Impact of Academic Competencies on Worker Productivity in Current Jobs The Effect of General Academic Achievement on Wages of Adults Are Regression Estimates of the Economic Payoff to Knowledge and Skill Biased? Which Competencies are Rewarded in the American Labor Market? Is There Reason to Expect Wage Effects of Specific Competencies to be the Same as Their Productivity Effects? The Impact of Academic and Generic Technical Competencies on the Job Performance in the American Military The Impact of Academic and Technical Competence on Job Performance in the Civili an Sector Policy Implications Trends in the Demand for Skill and the Payoff to Academic Competence Trends in Demand for and Supply of University Graduates. 52

8 vm The Supply and Demand Balance Trends in the Payoff to University Education Which College Specialties Generate the Largest Economic Payoff? 59 References Ruman Capital and Earnings in the Nordic Countries Rita Asplund, Erling Barth, Cari le Grand, Ame Mastekaasa and Niels Westergârd-Nielsen Introduction Empirical Model and Data. 70 Empirical Results Returns to Years of Schooling. 72 Returns to Educational Degrees. 74 Eamings Effects of Experience. 75 Earnings Effects of Experience and Seniority. 78 Earnings Differentials Between the Private and Public Sectors 84 Earnings Differentials Across Occupational Social Status Categories Stability of Estimates over Time. 86 Concluding Remarks.. 87 References. 88 Appendix The Impact of Family Background on the Returns on and Length of Schooling in Sweden Anders Bjorklund Introduction.... The Analytical Approach TheData. Results.. Conclusions References Regional and Occupational Wage Differences - Evidence from Workers in Norwegian Manufacturing Industries Kristin Dale 5.1 Introduction Method Model Log Linear Form Weighted Analysis Data Results

9 IX Comparing the Weighted and Unweighted Results.. Occupational Differences.... Regional Wage Differences.... Differences Between Women and Men Wage Differences by Firm Size... Wage Differences by Line oflndustry Conclusions... References Workplace Skill Accumulation and its Impact on Eamings and Labor Mobility: The U.S. Experience Lisa M. Lynch 6.1 Introduction Characteristics ofpost-schooi Training in the U.S The Impact of Training and Education on Wages The Impact of Training and Education on Labor Mobility Summary and Conciusions. 142 References Trends in Lifelong Learning in Europe Leenamaija Otala 7.1 Competence as an Element of Competitiveness Changing Business Environment - New Requirements on Lifelong Leaming Fast Developing Technology - Need for Continuous Competence DeveIopment Internationalisation of Business: New Demands on Human Resource DeveIopment Ageing Population - Need for Training Programmes for AlI Ages Decentralisation and Increasing Cost-Effectiveness - Training Becomes Better Focused but Only on Short-Term Issues New Values for Young EmpIoyees - New Demands on Employers SMEs are Important- Competence Development is StiU a ProbIem Conclusions of Trends in Business Impacting Needs of Lifelong Learning New Approaches to Lifeiong Learning are Needed Increasing Need for European-Wide Policies References Continuing Education and Schumpeterian Competition: Elements for a Theoretical Framework Gerard Ballot 8.1 Introductory Remarks

10 x 8.2 The Debate on Becker's Theorem Innovation and the Sharing of General Training Expenses Continuing Education in a Schumpeterian Framework - Some Prelimimuy Ideas Hierarchical Production Functions General Human Capital as an Input in the Production of Specific Human Capital in a Schumpeterian World Human Resources as a Detenninant of Future Technology and Performance Some Notes on the Consequences for the Competitiveness ofthe Economies. 169 References Education, Competence Development and Economic Growth - A Microeconomic Explanation to Macroeconomic Growth 172 Gunnar Eliasson 9.1 Introduction Growth Explanation or Accounting? Early Thinking About Education - Pre-quantitative Times. Neoclassical Analysis... The "New" Growth Theory.... Micro-Based Growth Analysis.. The Firm, Employer The Individual The Market Organizational Learning and Competition Drive Economic Growth.... The Limits to Learning The Content of Economically Valuable Knowledge.. Technical Change Creates More Competition..... Competition Creates Technical Change Connecting Organizational Competence Back to Competition and EconomicGrowth..188 Summing up Appendix References Uncertainty, Multivalence and Growth Kim Huynh and Marie-Pierre Merlateau Introduction The Model Under Certainty 197 Assumptions 198 TheModel

11 XI The Model Under Uncertainty. Introduction and Assumptions. The First Step The Second Step.... Consequences in Terms of Growth Conclusions References