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The human side of productivity: Uncovering the role of skills and diversity for firm productivity

Author

Listed:
  • Chiara Criscuolo
  • Peter Gal
  • Timo Leidecker
  • Giuseppe Nicoletti

Abstract

Relying on linked employer-employee datasets from 10 countries, this paper documents that the skills and the diversity of the workforce and of managers – the human side of businesses – account on average for about one third of the labour productivity gap between firms at the productivity “frontier” (the top 10% within each detailed industry) and medium performers at the 40-60 percentile of the productivity distribution. The composition of skills, especially the share of high skills, varies the most along the productivity distribution, but low and medium skilled employees make up a substantial share of the workforce even at the frontier.High skills show positive but decreasing productivity returns. Moreover, the skill mix of top firms varies markedly across countries, pointing to the role of different strategies pursued by firms in different policy environments. We also find that managerial skills play a particularly important role, also through complementarities with worker skills. Gender and cultural diversity among managers – and to a lesser extent, among workers – is positively related to firm productivity as well. We discuss public policies that can facilitate the catch-up of firms below the frontier through skills and diversity. These cover a wide range of areas, exerting their influence through three main channels: the supply, upgrading and the matching across firms (the SUM) of skills and other human factors.

Suggested Citation

  • Chiara Criscuolo & Peter Gal & Timo Leidecker & Giuseppe Nicoletti, 2021. "The human side of productivity: Uncovering the role of skills and diversity for firm productivity," OECD Productivity Working Papers 29, OECD Publishing.
    • Handle: RePEc:oec:ecoaac:29-en
    DOI: 10.1787/5f391ba9-en
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    Cited by:

    1. Bart van Ark & Dirk Pilat & Klaas de Vries, 2023. "Are Pro-Productivity Policies Fit for Purpose? Productivity Drivers and Policies in G-20 Economies," Working Papers 038, The Productivity Institute.
    2. Pardesi, Mantej, 2024. "Productivity convergence and firm’s training strategy," ROA Research Memorandum 003, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    3. Pardesi, Mantej, 2024. "Productivity Convergence and Firm’s Training Strategy," Research Memorandum 003, Maastricht University, Graduate School of Business and Economics (GSBE).
    4. Nuno Gonçalves & Carlos Carreira, 2023. "Intangible Capital and Productivity of Portuguese Firms in the Last Decade (2010-2019)," Notas Económicas, Faculty of Economics, University of Coimbra, issue 56, pages 110-132, July.
    5. João Amador & Ana Fernandes & Guida Nogueira, 2022. "The competitiveness of the Portuguese economy: A view from a composite indicator," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.

    More about this item

    Keywords

    diversity; linked employer-employee data; managers; productivity; skills;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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