Human capital in personal consumption and labour force productivity: evidence from an OECD panel

Abstract

The relationship of household stocks of information cumulated from personal consumption to a labour productivity index (LPI) is investigated. The regression model in an OECD panel controls for effects of domestic and foreign R&D, educational level and institutional factors on LPI. Human capital is proxied by mean years of education, and stocks of household information are constructed from deflated expenditure on a set of information goods in personal consumption. After unit root and cointegration testing, models were estimated with dynamic ordinary least squares (DOLS). Results show that the stocks of information constructed from consumer expenditure flows are related to LPI after control variables are accounted for. Effects of LPI on the stock of information are also investigated. In these results, the stock of information had a larger effect on LPI than LPI had on the stock. Policy implications for productivity objectives that include differential tax rates on consumption of information and conventional goods are noted.