Abstract
The standard assumption in growth accounting is that an hour worked by a worker of given type delivers a constant quantity of labor services over time. This assumption may be violated due to vintage effects, which were shown to be important in the United States since the early 1980s, leading to an underestimation of the growth of labor input (Bowlus anA1d Robinson, 2012). We apply their method for identifying vintage effects to a comparison between the United States and six European countries. We find that vintage effects led to increases of labor services per hour worked by high‐skilled workers in the United States and United Kingdom and decreases in Continental European countries between 1995 and 2005. Rather than a productivity growth advantage of the US and UK, the primary difference with Continental European countries was human capital vintage effects instead.
Highlights
Improvements in human capital have long been thought to contribute only modestly to economic growth, following the growth accounting method of Jorgenson and Griliches (1967).1 For example, Jorgenson et al (2016, Table 4) show that the United States economy grew at an average annual rate of 3.23 percent between 1947 and 2010 and that human capital improvements only contributed 0.24 percentage points to this total, with little variation in this contribution over time.2 Growth accounting relies on the assumption that an hour worked by a person of given type—distinguished by education, age and gender—provides a constant quantity of labor services over time
We find that vintage effects led to increases of labor services per hour worked by high-skilled workers in the United States and United Kingdom and decreases in Continental European countries between 1995 and 2005
Applying their method to data for the United States between 1963 and 2008, they find that the quantity of labor services per hour worked by college-educated workers increased substantially
Summary
Improvements in human capital have long been thought to contribute only modestly to economic growth, following the growth accounting method of Jorgenson and Griliches (1967). For example, Jorgenson et al (2016, Table 4) show that the United States economy grew at an average annual rate of 3.23 percent between 1947 and 2010 and that human capital improvements only contributed 0.24 percentage points to this total, with little variation in this contribution over time. Growth accounting relies on the assumption that an hour worked by a person of given type—distinguished by education, age and gender—provides a constant quantity of labor services over time. Bowlus and Robinson (2012) contribute to this literature by modifying the growth accounting method to accommodate vintage effects, whereby new graduates may differ from previous cohorts in terms of the quantity of labor services per hour worked that they supply, for instance due to improved schooling or on-the-job training.. Bowlus and Robinson (2012) contribute to this literature by modifying the growth accounting method to accommodate vintage effects, whereby new graduates may differ from previous cohorts in terms of the quantity of labor services per hour worked that they supply, for instance due to improved schooling or on-the-job training.3 Applying their method to data for the United States between 1963 and 2008, they find that the quantity of labor services per hour worked by college-educated workers increased substantially. They argue that there is a larger role for human capital in accounting for US growth than based on the traditional ‘constant quantity’ assumption
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