Work detail

The estimation of country – level production function aimed at understanding the role of human capital

Author: Mgr. Simona Mačorová
Year: 2013 - summer
Leaders: Mgr. Barbara Pertold-Gebicka M.A., Ph.D.
Consultants:
Work type: EEI & EP
Masters
Language: English
Pages: 68
Awards and prizes:
Link:
Abstract: Our goal is the estimation of country – level production function aimed at understanding the
role of human capital. We analyze the effect of education, especially the effect of the share of
college graduates in prime-age population (between 25 – 54 years) on the European Union
(EU) countries’ labor productivity. Here, an important issue is efficiency of tertiary education
institutions. We split the ratio of human capital to observe it from different aspects. We
compare an effect of lower and upper tertiary educated, by specializations and by gender. The
relationship between human capital and labor productivity was found positive though not
significant or significant only on 10 % confidence level. The influence of human capital on
labor productivity was found very low, in some cases even negative. Assuming that one of the
main reasons behind these contra-intuitive results is the problem of unobserved heterogeneity,
we also run instrumental variable estimation. We found positive and significant on 5 %
confidence level relationship between human capital and labor productivity. The influence of
larger share of tertiary educated people on labor productivity is more evident after some
period of time, in our example after two years.

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