Do Skill Shortages Reduce Productivity? Theory and Evidence from the United Kingdom

Jonathan Haskel () and Christopher Martin

Economic Journal, 1993, vol. 103, issue 417, 386-94

Abstract: In this paper the authors examine the effect of skilled labor shortages on productivity in the UK. They develop a simple model that explains how skill shortages might reduce productivity and its rate of growth. Shortages may lead firms to substitute unskilled for skilled workers thereby reducing productivi ty. They may also leave the firm less able to bargain higher levels of effort from their workers. Using a panel data set of 81 industries, 1980-86, the authors find that the increase in skill shortages over the mid-1980s reduced UK productivity growth by around 0.7 percent p er annum. Had shortages risen by the EC average, productivity growth wo uld have been about 0.4 percent per annum higher. Copyright 1993 by Royal Economic Society.

Date: 1993
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