Quality of Human and Physical Capital and Technological Gaps across Italian Regions

Scoppa, Vincenzo (2007): Quality of Human and Physical Capital and Technological Gaps across Italian Regions.

Abstract

This paper evaluates the relative contribution of factor accumulation and technology in explaining output per worker differences across Italian regions in the period 2000-2004. The contributions of physical and human capital are separately estimated through the variance decomposition of output per worker. Whereas from a basic analysis of development accounting with crude data TFP emerges as a fundamental determinant of output per worker, when more accurate data are used in the estimations of human and physical capital, results change radically, showing a higher importance of factor accumulation with respect to previous standard estimations. Several measures of quality of human and physical capital are introduced: a) individuals’ cognitive skills as measured in international test scores; b) region specific rates of return on human capital; c) public investments and public-subsidized investments are weighted differently from private investment in the determination of physical capital stock. We show that better measurement of factor inputs allows a reduction in the solowian “measure of our ignorance”.

• Item Type: MPRA Paper
• Language: English
• Keywords: Growth; Technological Gaps; Human Capital; Physical Capital; Development Accounting; Quality of inputs
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E23 - Production; E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E13 - Neoclassical

References

ACEMOGLU, D. and ANGRIST, S. (2000) How Large are Human Capital Externalities: Evidence from Compulsory Schooling Laws, in B.S. BERNANKE, and K. ROGOFF, eds., NBER Macroeconomics Annual, (MIT Press, Cambridge), 9-59.

AIELLO, F. and SCOPPA, V. (2000), Uneven Regional Development in Italy: Explaining Differences in Productivity Levels, Giornale degli Economisti e Annali di Economia, 60, 2, 270-98.

BARRO, R. and SALA-I-MARTIN, X., (1995) Economic Growth, McGraw-Hill, New York.

BERNANKE, B. and GURKAYNAK, R., (2001) Is Growth Exogenous. Taking Mankiw-Romer-Weil seriously, NBER Working Paper no. 8365.

BERNARD, A. and JONES, C. (1996) Technology and Convergence, Economic Journal, 107, 1037-44.

BILS, M. and KLENOW, P., (2000) Does Schooling Cause Growth?, American Economic Review, December, 90, 1160-83.

BONAGLIA, F. and PICCI, L. (2000) Lo stock di capitale nelle regioni italiane, Working Paper n. 374, Dipartimento di Scienze Economiche, University of Bologna.

BRUNELLO, G. and MINIACI, R. (1999) The Economic Returns to Schooling for Italian Men. An Evaluation based on Instrumental Variables, Labour Economics, 509-19.

CASELLI, F. (2005) Accounting for Cross-Country Income Differences, forthcoming in P. AGHION and S. DURLAUF (eds.) The Handbook of Economic Growth, North Holland, Amsterdam: 2005.

CASELLI, F., G. ESQUIVEL, and F. LEFORT (1996) Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics, Journal of Economic Growth, 1, 363-389.

CICCONE, A., (2004), Human Capital as a Factor of Growth and Employment at the Regional Level: The Case of Italy, mimeo.

CICCONE, A., CINGANO, F., and CIPOLLONE, P. (2004) The Private and Social Return to Schooling in Italy, Giornale degli Economisti e Annali di Economia, 63, 227-247.

CURRIE, J., and THOMAS, D. (1999) Early Test Scores, Socioeconomic Status and Future Outcomes, NBER Working Paper No. 6943.

DENNY, K., HARMON, C., and O'SULLIVAN, V. (2004) Education, Earnings and Skills: A Multi-country Comparison, Institute for Fiscal Study, WP 04/08.

DI LIBERTO, A., MURA, R., and PIGLIARU, F. (2004) How to measure the unobservable: A panel technique for the analysis of TFP Convergence, Contributi di Ricerca CRENOS, University of Cagliari.

EASTERLY, W. and LEVINE, R. (2001) Is Not Factor Accumulation: Stylized Facts and Growth Models, World Bank.

GIAVAZZI, F., 2005, Lobby d'Italia. L'Italia dei monopoli, delle corporazioni e dei privilegi, Rizzoli, Milano.

GOLDEN M., and PICCI L., (2005), Proposal for a New Measure of Corruption. Illustrated with Italian Data, Economics and Politics, March, 17 (1), 37-75.

GOLLIN, D. (2002) Getting Income Shares Right, Journal of Political Economy, 110(2), 458-74.

GUNDLACH, E., RUDMAN, D. and WOESSMANN, L. (2002) Second Thoughts on Development Accounting, Applied Economic, 34, 1359-69.

HALL, R. and JONES, C. (1999) Why do Some Countries Produce So Much More Output per Worker than Others?, Quarterly Journal of Economics, 114, 83-116.

HANUSHEK E. and KIMKO, D. (2000) Schooling, Labor-Force Quality, and the Growth of Nations, American Economic Review, 90, 1184-1208.

HANUSHEK, E. (1996) Measuring Investment in Education, Journal of Economic Perspectives, 10, 9-30.

ISLAM, N. (1995) Growth Empirics: A Panel Data Approach, Quarterly Journal of Economics, 110, 1127-70.

JORGENSON, D. and GRILICHES, Z. (1967) The Explanation of Productivity Change, Review of Economic Studies, 34, 249-83.

JUHN, C., MURPHY, K., and PIERCE, B., (1993) Wage Inequality and the Rise in Returns to Skills, Journal of Political Economy, 101, 410-442.

KATZ, L., and AUTOR, D., (1999) Changes in the Wage Structure and Earnings Inequality, in ASHENFELTER, O., CARD, D., eds., Handbook of Labor Economics, vol. 3A, Amsterdam, North-Holland.

KATZ, L., and MURPHY, M., (1992) Changes in Relative Wages, 1963-1987: Supply and Demand Factors, Quarterly Journal of Economics, 107, 35-78.

KLENOW, P. and RODRIGUEZ-CLARE, A. (1997) The Neoclassical Revival in Growth Economics: Has It Gone Too Far?, NBER Macroeconomics Annual, 12, 73-103.

LEE, J. W. and BARRO, R. (2001) Schooling Quality in a Cross–Section of Countries, Economica, 68, 465-88.

MANKIW, G. (1997) Comment on Klenow and Rodriguez-Clare: The Neoclassical Revival in Growth Economics: Has It Gone Too Far?, NBER Macroeconomics Annual, 12, 103-8.

MANKIW, G., ROMER, D. and WEIL, D. (1992) A Contribution to the Empirics of Growth, Quarterly Journal of Economics, 107, 408-37.

MARROCU E., PACI R. and PALA, R. (2001) Estimation of Total Factor Productivity for Regions and Sectors in Italy: A Panel Cointegration Approach, Rivista Internazionale di Scienze Economiche e Commerciali, 48, 533-58.

MCGRATTAN, E. and SCHMITZ, J. (1998) Explaining cross-country Income Differences, Federal Reserve Bank of Minneapolis Research Department, Staff Report 250.

MURNANE, R., J. WILLETT, and LEVY, F. (1995) The Growing Importance of Cognitive Skills in Wage Determination, Review of Economics and Statistics, 77, 251-66.

NEAL, A., and JOHNSON, R. (1996) The Role of Premarket Factors in Black-White Wage Differences, Journal of Political Economy, 104, 869-95.

PACI, R. and PUSCEDDU, N. (1999) Stima dello stock di capitale nelle regioni italiane: 1970-1994, Contributi di Ricerca CRENOS, University of Cagliari.

PICCI, L. (1995) Lo stock di capitale nelle regioni italiane, Working Paper n. 4, Dipartimento di Scienze Economiche, University of Bologna.

PRITCHETT, L., (2000) The Tyranny of Concepts: CUDIE (Cumulated, Depreciated, Investment Effort) Is Not Capital, Journal of Economic Growth, 5, 361-84.

PRITCHETT, L. (2004) Does learning to add up add up? The returns to schooling in aggregate data, in Handbook of Education Economics, Harvard University.

PSACHAROPOULOS, G. (1994) Returns to Investment in Education: a Global Update. World Development, 22, 1325-43.

ROMER, P., (1993) Idea Gaps and Object Gaps in Economic Development, Journal of Monetary Economics, 32, 543-573.

ROSSI, N., (2005) Mediterraneo del Nord. Un'altra idea del Mezzogiorno, Laterza, Roma.

SCALERA, D. and ZAZZARO, A., (2000) Incentivi agli investimenti o rendite alle imprese? Una riflessione sulla procedura di allocazione dei sussidi prevista dalla legge 488/1992, Rivista di Politica Economica,, 69-100.

TEMPLE, J. (1999) The New Growth Evidence, Journal of Economic Literature, 1, 112-56.

WOESSMAN, L. (2003) Specifying Human Capital, Journal of Economic Surveys, 17, 239-70.

YOUNG, A. (1995) The Tyranny of Numbers. Confronting the Statistical Realities of the East Asian Growth Experience, Quarterly Journal of Economics, 110, 641-80.