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The Relation among Human Capital, Productivity and Market Value: Building Up from Micro Evidence
December 2002
Working Paper Number:
tp-2002-14
This paper investigates and evaluates the direct and indirect contribution of human capital
to business productivity and shareholder value. The impact of human capital may occur in two ways:
the specific knowledge of workers at businesses may directly increase business
performance, or a skilled workforce may also indirectly act as a complement to improved
technologies, business models or organizational practices. We use newly created firm-level
measures of workforce human capital and productivity to examine links between those measures
and the market value of the employing firm. The new human capital measures come from an
integrated employer-employee data base under development at the US Census Bureau. We link
these data to financial information from Compustat at the firm level, which provides measures of
market value and tangible assets. The combination of these two sources permits examination of
the link between human capital, productivity, and market value. There is a substantial positive
relation between human capital and market value that is primarily related to the unmeasured
personal characteristics of the employees, which are captured by the new measures.
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Productivity, Investment in ICT and Market Experimentation: Micro Evidence from Germany and the U.S.
February 2003
Working Paper Number:
CES-03-06
In this paper, we examine the relationship between the use of advanced technologies, such as information and communications technologies (ICT), and related business practices and outcomes such as productivity, employment, the skill mix of the workforce and wages using micro data for the U.S. and Germany. . We find support to the idea that U.S. businesses engage in experimentation in a variety of ways not matched by their German counterparts. In particular, there is greater experimentation amongst young US businesses and there is greater experimentation among those actively changing their technology. This experimentation is evidenced in a greater dispersion in productivity and in related key business choices, like the skill mix and Internet access for workers. We also find that the mean impact of adopting new technology is greater in U.S. than in Germany. Putting the pieces together suggests that U.S. businesses choose a higher mean, higher variance strategy in adopting new technology.
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The Link Between Aggregate and Micro Productivity Growth: Evidence from Retail Trade
August 2002
Working Paper Number:
CES-02-18
Understanding the nature and magnitude of resource reallocation, particularly as it relates to productivity growth, is important both because it affects how we model and interpret aggregate productivity dynamics, and also because market structure and institutions may affect the reallocation's magnitude and efficiency. Most evidence to date on the connection between reallocation and productivity dynamics for the U.S. and other countries comes from a single industry: manufacturing. Building upon a unique establishment-level data set of U.S. retail trade businesses, we provide some of the first evidence on the connection between reallocation and productivity dynamics in a non-manufacturing sector. Retail trade is a particularly appropriate subject for such a study since this large industry lies at the heart of many recent technological advances, such as E-commerce and advanced inventory controls. Our results show that virtually all of the productivity growth in the U.S. retail trade sector over the 1990s is accounted for by more productive entering establishments displacing much less productive exiting establishments. Interestingly, much of the between-establishment reallocation is a within, rather than betweenfirm phenomenon.
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Decomposing the Sources of Earnings Inequality: Assessing the Role of Reallocation
September 2010
Working Paper Number:
CES-10-32
This paper uses matched employer-employee data from the U.S. Census Bureau to investigate the contribution of worker and firm reallocation to changes in wage inequality within and across industries between 1992 and 2003. We find that the entry and exit of firms and the sorting of workers and firms based on underlying worker skills are important sources of changes in earnings distributions over time. Our results suggest that the underlying dynamics driving changes in earnings inequality are complex and are due to factors that cannot be measured in standard cross-sectional data.
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How Workers Fare When Employers Innovate
May 2003
Working Paper Number:
CES-03-11
Complementing existing work on firm organizational structure and productivity, this paper examines the impact of organizational change on workers. We find evidence that employers do appear to compensate at least some of their workers for engaging in high performance workplace practices. We also find a significant association between high performance workplace practices and increased wage inequality. Finally, we examine the relationship between organizational structure and employment changes and find that some practices, such as self-managed teams, are associated with greater employment reductions, while other practices, such as the percentage of workers involved in job rotation, are associated with lower employment reductions.
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Between Firm Changes in Earnings Inequality: The Dominant Role of Industry Effects
February 2020
Working Paper Number:
CES-20-08
We find that most of the rising between firm earnings inequality that dominates the overall increase in inequality in the U.S. is accounted for by industry effects. These industry effects stem from rising inter-industry earnings differentials and not from changing distribution of employment across industries. We also find the rising inter-industry earnings differentials are almost completely accounted for by occupation effects. These results link together the key findings from separate components of the recent literature: one focuses on firm effects and the other on occupation effects. The link via industry effects challenges conventional wisdom.
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Technology and Jobs: Secular Changes and Cyclical Dynamics
September 1996
Working Paper Number:
CES-96-07
In this paper, we exploit plant-level data for U.S. manufacturing for the 1970s and 1980s to explore the connections between changes in technology and the structure of employment and wages. We focus on the nonproduction labor share (measured alternatively by employment and wages) as the variable of interest. Our main findings are summarized as follows: (i) aggregate changes in the nonproduction labor share at annual and longer frequencies are dominated by within plant changes; (ii) the distribution of annual within plant changes exhibits a spike at zero, tremendous heterogeneity and fat left and right tails; (iii) within plant secular changes are concentrated in recessions; and (iv) while observable indicators of changes in technology account for a significant fraction of the secular increase in the average nonproduction labor share, unobservable factors account for most of the secular increase, most of the cyclical variation and most of the cross sectional heterogeneity.
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Rising Markups or Changing Technology?
September 2022
Working Paper Number:
CES-22-38R
Recent evidence suggests the U.S. business environment is changing, with rising market concentration and markups. The most prominent and extensive evidence backs out firm-level markups from the first-order conditions for variable factors. The markup is identified as the ratio of the variable factor's output elasticity to its cost share of revenue. Our analysis starts from this indirect approach, but we exploit a long panel of manufacturing establishments to permit output elasticities to vary to a much greater extent - relative to the existing literature - across establishments within the same industry over time. With our more detailed estimates of output elasticities, the measured increase in markups is substantially dampened, if not eliminated, for U.S. manufacturing. As supporting evidence, we relate differences in the markups' patterns to observable changes in technology (e.g., computer investment per worker, capital intensity, diversification to non-manufacturing) and find patterns in support of changing technology as the driver of those differences.
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Aggregate Productivity Growth: Lessons From Microeconomic Evidence
September 1998
Working Paper Number:
CES-98-12
In this study we focus on the role of the reallocation of activity across individual producers for aggregate productivity growth. A growing body of empirical analysis yields striking patterns in the behavior of establishment-level reallocation and productivity. Nevertheless, a review of existing studies yields a wide range of findings regarding the contribution of reallocation to aggregate productivity growth. Through our review of existing studies and our own sensitivity analysis, we find that reallocation plays a significant role in the changes in productivity growth at the industry level and that the impact of net entry is disproportionate since entering plants tend to displace less productive exiting plants, even after controlling for overall average growth in productivity. However, an important conclusion of our sensitivity analysis is that the quantitative contribution of reallocation to the aggregate change in productivity is sensitive to the decomposition methodology employed. Our findings also confirm and extend others in the literature that indicate that both learning and selection effects are important in this context. A novel aspect of our analysis is that we have examined the role of reallocation for aggregate productivity growth to a selected set of service sector industries. Our analysis considers the 4-digit industries that form the 3-digit industry automobile repair shops. We found tremendous churning in this industry with extremely large rates of entry and exit. Moreover, we found that productivity growth in the industry is dominated establishment data at Census, the results are quite striking and clearly call for further analysis.
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Dispersion in Dispersion: Measuring Establishment-Level Differences in Productivity
April 2018
Working Paper Number:
CES-18-25RR
We describe new experimental productivity statistics, Dispersion Statistics on Productivity (DiSP), jointly developed and published by the Bureau of Labor Statistics (BLS) and the Census Bureau. Productivity measures are critical for understanding economic performance. Official BLS productivity statistics, which are available for major sectors and detailed industries, provide information on the sources of aggregate productivity growth. A large body of research shows that within-industry variation in productivity provides important insights into productivity dynamics. This research reveals large and persistent productivity differences across businesses even within narrowly defined industries. These differences vary across industries and over time and are related to productivity-enhancing reallocation. Dispersion in productivity across businesses can provide information about the nature of competition and frictions within sectors, and about the sources of rising wage inequality across businesses. Because there were no official statistics providing this level of detail, BLS and the Census Bureau partnered to create measures of within-industry productivity dispersion. These measures complement official BLS aggregate and industry-level productivity growth statistics and thereby improve our understanding of the rich productivity dynamics in the U.S. economy. The underlying microdata for these measures are available for use by qualified researchers on approved projects in the Federal Statistical Research Data Center (FSRDC) network. These new statistics confirm the presence of large productivity differences and we hope that these new data products will encourage further research into understanding these differences.
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