Measurement of labour quality growth caused by unobservable characteristics

Thomas Bolli and Mathias Zurlinden

Applied Economics, 2012, vol. 44, issue 18, 2297-2308

Abstract: The standard economy-wide indices of labour quality (or human capital) largely ignore the role of unobservable worker characteristics. In this article, we develop a methodology for identifying the contributions of both observable and unobservable worker characteristics in the presence of the incidental parameter problem. Based on data for Switzerland over the period 1991 to 2006, we find that a large part of growth in labour quality is caused by shifts in the distribution of unobservable worker characteristics. The overall index differs little from the standard indices, but contributions to growth attributed to education and age are corrected downwards.

Date: 2012
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Related works:
Working Paper: Measurement of labor quality growth caused by unobservable characteristics (2009)
Working Paper: Measurement of Labor Quality Growth: Caused by Unobservable Characteristics (2008)
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DOI: 10.1080/00036846.2011.564140

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