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Productivity Gap between Tradable and Non-Tradable Industries and Duality in Higher Education

Elise Brezis () and Gilad Brand

No 2017-10, Working Papers from Bar-Ilan University, Department of Economics

Abstract: Over the last decades, productivity in the tradable sector rose substantially, while in the non-tradable sector, output per worker has remained the same, despite a similar increase in human capital in both sectors. This paper emphasizes that duality in higher education as well as heterogeneous ability of individuals can explain the differences in labor productivity between tradable and non-tradable industries. The duality in the higher-education sector enables a separation of individuals by their ability, and in consequence, human capital in both industries is different. The heterogeneity in human capital can explain that despite an increase in human capital in both sectors, there is still a gap in productivity. In other words, the productivity gap between tradable and non-tradable sectors is fueled by the duality in higher education, leading to heterogeneity in human capital. In consequence, there is a contrast between on one hand, more mobility across countries, and on the other hand, less mobility between sectors.

Keywords: ability; skills; productivity; tradable goods; services; duality; higher education; human capital; wage premium. (search for similar items in EconPapers)
JEL-codes: F12 F16 F66 I26 J24 O14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-edu and nep-eff
Date: 2017-10
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