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Changes in Human Capital: Implications for Productivity Growth in the Euro Area

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  • Guido Schwerdt
  • Jarkko Turunen

Abstract

The euro area has experienced a sustained decline in labour productivity growth since the 1980s. In the economic literature this phenomenon is commonly explained by a decline in capital deepening and lower total factor productivity (TFP) growth. However, the decline in labour productivity growth might partly also reflect a lower contribution of labour quality growth. We present evidence of changes in human capital in a number of euro area countries based on a fixed-weight index for labour quality growth for both the employed population and the labour force. We then evaluate the significance of these changes for recent developments in productivity growth. Our findings suggest that euro area labour quality has indeed moderated towards the end of the 1990’s, but the impact on labour productivity growth is small compared to the overall decline in capital deepening and total factor productivity growth.

Suggested Citation

  • Guido Schwerdt & Jarkko Turunen, 2007. "Changes in Human Capital: Implications for Productivity Growth in the Euro Area," ifo Working Paper Series 53, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:ifowps:_53
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    References listed on IDEAS

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    3. Özdemir Onur, 2019. "Financialization and the Labor Share of Income," Review of Economic Perspectives, Sciendo, vol. 19(4), pages 265-306, December.

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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