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Employment, schooling and productivity growth

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Summary

This paper presents an empirical analysis of labour demand and labour productivity growth in The Netherlands. Assuming an aggregate production function with as factors capital and 3 types of labour, distinguished by educational attainment, cost minimization leads to a set of 3 labour demand relations to be estimated on time series data. Using the estimates and the implied elasticities, aggregate labour productivity growth is decomposed into factor substitution, autonomous factors, labour time shortening, economies of scale, utilization rates and the increased educational level of the working population. The contributions of substitution, utilization rates and education appear to be substantial, notably in the seventies.

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Abbreviations

a i :

Efficiency index of skill leveli

C :

production

h i :

working-time index for skill leveli

g i :

steady-state growth rate of skill leveli

K :

capital stock

L i :

employment volume of skill leveli

L * i :

desired level of labour skill leveli

p :

output price

p * :

desired output price

s * i :

long-run static labour shares in the production value

p k :

rental price of capital

P :

index of total factor productivity

P l :

index of labour productivity

u i :

utilization rate of skill leveli

u k :

utilization rate of capital

w i :

wage rate for skill leveli

y :

production volume

y yij :

Hicks partial elasticities of complementarity

θ i :

steady-state cost share of skill leveli

θ k Bk:

steady-state cost share of capital

λ f lf:

highest level price index in cost function nesting

λ g 4:

intermediate level price index in cost function nesting

λ h 4:

lowest level price index in cost function nesting

ν i :

steady-state relative wage share of skill leveli

σ ij :

Allen partial elasticities of substitution

d i l:

adjustment speed of skill leveli

d p :

price adjustment speed

M :

mark-up on marginal costs

ν :

scale elasticity of production

α i :

distribution parameter in cost function,i = 3, g

β i :

distribution parameter in cost function,i = k, h

γ i :

distribution parameter in cost function,i =1, 2

η i :

autonomous labour productivity growth for skill leveli

ζ i :

cost share of skill level in base year

ζ f :

production cost index in base year

ξ i :

hours elasticity in labour efficiency index

σ :

group elasticity of substitution betweenL 3 and (K, (L 1,L 2))

σ g Og:

group elasticity of substitution betweenK and (L 1,L 2)

σ h 6h:

group elasticity of substitution betweenL 1 andL 2

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Authors and Affiliations

  1. Faculty of Economics, Erasmus University, The Netherlands

    W. J. Jansen

Authors
  1. D. P. Broer
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  2. W. J. Jansen
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Additional information

We would like to thank B. Downey, G.M.M. Gelauff, A. Nieuwenhuis, J.M.M. Ritzen, J.C. Siebrand and an unknown referee for helpful comments on earlier drafts.

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Broer, D.P., Jansen, W.J. Employment, schooling and productivity growth. De Economist 137, 425–453 (1989). https://doi.org/10.1007/BF01705974

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