Human Capital Spillovers in the Workplace: Labor Diversity and Productivity

Navon, Guy (2009): Human Capital Spillovers in the Workplace: Labor Diversity and Productivity.

Abstract

The paper studies the relationship between human capital spillovers and productivity using a unique longitudinal matched employer–employee dataset of Israeli manufacturing plants that contains individual records on all plant employees. I focus on the within-plant diversity of employees’ higher-education diplomas (university degrees). The variance decomposition shows that most knowledge diversity takes place within the industries. Using a semi-parametric approach, the study finds that hiring workers who are diversified in their specific knowledge is beneficial for plants’ productivity—the knowledge-diversity elasticity is about 0.2–0.25 and is robust—and that the benefit of knowledge diversity increase with the size of the plant. This suggests that for each allocation of labor in the production process it is beneficial for plants to diversify their skilled labor. The findings also suggest that the conventional way of estimating plant-level production function using Ordinary Least Squares or Fixed-Effects method is biased upward due to simultaneity of the inputs and the unobserved productivity shock.

• Item Type: MPRA Paper
• Language: English
• Keywords: human capital, spillovers, within, firm, plant, guy, navon, pakes, levinsohn, petrin, poi, olley
• Subjects: J - Labor and Demographic Economics > J4 - Particular Labor Markets > J41 - Labor Contracts; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity; D - Microeconomics > D2 - Production and Organizations > D24 - Production ; Cost ; Capital ; Capital, Total Factor, and Multifactor Productivity ; Capacity; J - Labor and Demographic Economics > J8 - Labor Standards: National and International > J82 - Labor Force Composition

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