Human Capital Gap Research Articles

Effects of North–South trade on wage inequality and on human-capital accumulation

This paper develops an endogenous growth model with technological knowledge directed towards high- versus low-skilled labour, augmented with North–South international trade of intermediate goods and with human-capital accumulation, to analyse how trade affects wage inequality and the inter-country human-capital gap. Trade is a vehicle for inter-country technological-knowledge diffusion and human-capital accumulation interacts with the intra-country direction of technological knowledge arising from trade. In contrast with the market-size effect, stressed in the skill-biased technological change literature, the operation of the price channel following openness to trade predicts, in line with the recent trends in developed and developing countries, an increasing technological-knowledge bias towards high-skilled human capital. This, in turn, decreases inter-country gaps of technological knowledge and human capital and increases intra-country wage inequality. Also in line with recent empirical evidence, inter-country wage convergence is induced by the trade-opening level effect.

Liberia: Inclusive Growth Diagnostics

Government of Liberia aims to achieve middle income status by 2030 through broad participation and inclusive growth. The country's growth strategy is one of accelerating the exploitation of natural resources, while maintaining sound macro policies, improving the business environment and prudently allocating and and commodity-based financing resources in key infrastructure areas. An Inclusive Growth Diagnostics framework is applied, which points out to severe human capital gaps and the existence of a vicious circle that prevents both the emergence of potentially attractive new economic activities and the take off of SMEs. Such vicious circle arises from information and coordination externalities, which compound to the inefficient allocation of the country's relatively scarce financial resources for building up the human and physical capital necessary for investments and growth.

Pitfalls of immigrant inclusion into the European welfare state

This paper's main purpose is to gauge immigrants' demand for social assistance and services and identify the key barriers to social and labor market inclusion of immigrants in the European Union. The data from an online primary survey of experts from organizations working on immigrant integration in the EU is analyzed using simple comparative statistical methods; the robustness of the results is tested by means of Logit and ordered Logit statistical models. We find that the general public in Europe has rather negative attitudes towards immigrants. Although the business community views immigrants somewhat less negatively, barriers to immigrant labor market inclusion identified include language and human capital gaps, a lack of recognition of foreign qualifications, discrimination, intransparent labor markets and institutional barriers such as legal restrictions for foreign citizens. Exclusion from higher education, housing and the services of the financial sector aggravate these barriers. Changes in the areas of salaried employment, education, social insurance, mobility and attitudes are seen as most desired by members of ethnic minorities. The current economic downturn is believed to have increased the importance of active inclusion policies, especially in the areas of employment and education. These results appear to be robust with respect to a number of characteristics of respondents and their organizations.

Vertical FDI versus outsourcing: The role of host country human capital

The existing literature on offshoring neglects the importance of host country conditions in affecting the boundaries of a firm. In this paper, we focus on the role of the host country's human capital in affecting the organization of offshore production. Acknowledging that an input is produced offshore only after training the host labor, we propose that this training cost depends on the human capital gap between the home and the host country. Our model finds that a sourcing firm prefers to offshore production internationally only if the human capital gap between the home and the host country is below a threshold. Secondly, as the human capital gap increases, the probability for international outsourcing vis-à-vis intra-firm trade increases. Finally, as opposed to conventional wisdom, our model shows the possibility of outsourcing inputs of a high-tech good when the human capital gap between the home and the host is high.

Gender Gaps in Human Capital in Developing Countries: An Empirical Assessment

This paper examines the impact of various determinants on gender gaps in human capital in developing countries. We find that female primary completion is dependent on per capita GDP growth, female employment in agriculture, in industry, and in services, and the interactions between per capita GDP growth and female employment in industry and in services. We are also able to show that the ratio of girls to boys’ enrollments in primary and secondary schools is a function of the poverty rate, the fraction of the population with access to an improved water source, and maternal mortality. In addition, we observe that girls’ mortality is dependent upon the fraction of the population having access to improved sanitation and water services, and ethnic fractionalization. Finally, we find that maternal mortality is a function of the fraction of the population with access to improved water services, the fraction of births attended by skilled staff, the fraction of women receiving prenatal care, and ethnic fractionalization. These statistical results can assist developing countries identify areas that need to be improved upon in order to reduce gender gaps in human capital—specifically those concerning female mortality and education.

Pitfalls of immigrant inclusion into the European welfare state

PurposeThis paper's main purpose is to evaluate immigrants’ demand for social assistance and services and identify the key barriers to social and labor market inclusion of immigrants in the European Union.Design/methodology/approachAn online primary survey of experts from NGOs and public organizations working on immigrant integration in the member states of the European Union was carried out. The data is analyzed using simple comparative statistical methods; the robustness of the results is tested by means of logit and ordered logit statistical models.FindingsThe authors find that the general public in Europe has rather negative attitudes towards immigrants. Although the business community views immigrants somewhat less negatively, barriers to immigrant labor market inclusion identified include language and human capital gaps, a lack of recognition of foreign qualifications, discrimination, non‐transparent labor markets and institutional barriers such as legal restrictions for foreign citizens. Exclusion from higher education, housing and the services of the financial sector aggravate these barriers. Changes in the areas of salaried employment, education, social insurance, mobility and attitudes are seen as desired by members of ethnic minorities. The current economic downturn is believed to have increased the importance of active inclusion policies, especially in the areas of employment and education. These results appear to be robust with respect to a number of characteristics of respondents and their organizations.Research limitations/implicationsThe authors’ findings are not limited to the sample studied, which is supported by their robustness analysis. However an extended opinion survey of the ethnic minority population is required to more accurately examine the problems faced by diverse groups of immigrants across EU member states.Practical implicationsThe findings of the study call for more effective diversity management and integration strategies to ensure non‐discrimination and better integration of ethnic minorities into the labor markets of member states.Originality/valueThere are few studies using primary survey data that have identified a wide range of barriers and challenges to economic integration faced by ethnic minorities in an enlarged European Union. The cross‐national opinion survey uniquely reflects views and suggestions of practitioners and immigrant minorities themselves.

Rising Inequality in China and the Move to a Balanced Economy

AbstractChina faces serious external (i.e. trade) and internal (i.e. structural) imbalances. Both are related to income inequality, reduction of which will help to increase domestic demand. This paper discusses how income inequality has evolved over time. This is followed by an exploration of the consequences of high inequality. Driving forces underlying the rising inequality are analyzed before providing concrete policy recommendations. It is found that inequality declined in the early period of reform, until the mid to late 1980s, and then began a rising trend up to 2010. Major determinants of inequality include: location, institutional and policy factors, trade and globalization, and education inequality and human capital gaps along rural–urban and spatial divisions. To achieve a balanced economy and a harmonious society, development policies in China must shift from emphasizing growth to prioritizing equality. In addition, government interventions can target rural–urban disparity through rapid urbanization, and tackle regional inequality by developing financial markets, ensuring progressive allocation of fiscal resources, promoting trade and foreign direct investment in inland China, creating more formal jobs and supporting the service sector.

Ethnic and parental effects on schooling outcomes before and during the transition: evidence from the Baltic countries

This paper examines human capital gap between titular ethnicities and Russian-speaking minorities, which has emerged in Estonia, Latvia, and Lithuania during the transition and remains significant after controlling for parental education. For recent cohorts, unexplained gap is declining in Lithuania (despite absence of Russian language tertiary education) and in Estonia. Furthermore, we investigate intergenerational mobility in the Baltic countries. Parental education has a strong positive effect on propensity to obtain tertiary education, both in the Soviet era and post-Soviet period. Transition to the market has weakened mother’s education effect for titular ethnicities, while the opposite is true for minorities.

Is Poland the Next Spain?

We revisit Western Europe’s record with labour-productivity convergence, and tentatively extrapolate its implications for the future path of Eastern Europe. The poorer Western European countries caught up with the richer ones through both higher rates of physical capital accumulation and greater total factor productivity gains. These (relatively) high rates of capital accumulation and TFP growth reflect convergence along two margins. One margin (between industry) is a massive reallocation of labour from agriculture to manufacturing and services, which have higher capital intensity and use resources more efficiently. The other margin (within industry) reflects capital deepening and technology catch-up at the industry level. In Eastern Europe the employment share of agriculture is typically quite large, and agriculture is particularly unproductive. Hence, there are potential gains from sectoral reallocation. However, quantitatively the between-industry component of the East’s income gap is quite small. Hence, the East seems to have only one real margin to exploit: the within-industry one. Coupled with the fact that within-industry productivity gaps are enormous, this suggests that convergence will take a long time. On the positive side, however, Eastern Europe already has levels of human capital similar to those of Western Europe. This is good news because human capital gaps have proved very persistent in Western Europe’s experience. Hence, Eastern Europe does start out without the handicap that is harder to overcome.

Market Transition and Gender Gap in Earnings in Urban China

In this article, we examine the relationship between market transition and gender gap in earnings in urban China. We analyze change in the gender gap in human capital, political capital, labor-force placement, and family structure; change in the amount of monetary return to these determinants; and the changing significance of these sources of influence. We do so by analyzing two national samples from the 1988 and 1995 Chinese Household Income Project (CHIP) and city-level data for 1995. We found no longitudinal change nor city-level variation in the gender gap in earnings. Despite this stability, the proportion of the gender gap in earnings attributable to education and occupational segregation increased over time. This change is disproportional, occurring largely only in the most marketized cities. In these highly marketized cities, the significance of market-related mechanisms — education and occupation and industry-placement — has increased, while the contribution of redistribution-related mechanisms — affiliation with the state sector, party membership, and seniority — has decreased. These changes indicate that the Chinese market transition is a nonlinear, cumulative process.

Innovation networks in eastern germany — a still under-utilised potential for human capital formation in the region

In regard to easing the shortage of skilled labour the networking of protagonists in the InnoRegios is not, as yet, sufficient on the whole. In particular, companies are not sufficiently involved. The potential for networking to close the human capital gap is apparently still not being fully utilised in the innovation networks. One explanation could be the low implementation rate of the planned basic and advanced training projects so far. It must also be borne in mind that companies could assess the risks of cooperation as greater than the possible advantages, as they are competing on the labour market. Another explanation is that the participants in the networks expect technological projects to offer greater success.

Intercity variation in gender inequalities in China: analysis of a 1995 national survey

Recent research portrays a mixed picture of the impact of post-1978 economic reforms on gender inequality in China. We analyze a 1995 national survey of urban China (10,967 individuals in 55 cities) and city-level data compiled from Chinese statistical yearbooks to show intercity covariations between an index of marketization and a set of indicators of gender inequality in the labor markets. Our analysis shows gender gaps in human capital, political capital, labor market placement, and work earnings. Most of these gender inequalities remain constant across cities of varying degrees of product, labor, and capital marketization. To the extent that the amount of gender inequality is correlated with marketization, this association is a non-monotonic one, indicating a nonlinear, accumulative marketization process. Major changes have taken place in the most marketized cities, where the gender disparity in affiliation with the state sector has diminished and gender-based occupational segregation has been on the rise.

Intergroup Disparity: Economic Theory and Social Science Evidence

Consider a hypothetical community where two groups are distinguished by an ascriptive characteristic or a set of ascriptive characteristics that are understood as separating markers by the members of each of the groups. Indeed, the distinguishing characteristics may be recognized by others external to the two groups or external to the community. Furthermore, these separating markers are associated with the social categories of race or ethnicity. Credible surveys taken by researchers reveal that, on average, the members of the two groups experience widely distinct economic outcomes. Members of group A are found to have significantly lower earnings, a higher incidence of unemployment, less prestigious occupations, lower levels of total income, and substantially lower levels of wealth than members of group B. Conventional economics offers two major explanations for the observed disparity between groups A and B. First, average productivity-linked endowments (or a human capital gap) correlate strongly with membership in each of these ascriptively bounded groups, producing the differences in outcome. The origins of these background differences have been attributed to a variety of causes. The four most prominent reasons offered for the wedge in human capital acquisition have been (i) an unequal allocation of social resources across the two groups, (ii) the intergenerational transmission of past disadvantage or advantage across the groups, (iii) somewhat invidiously, cultural differences between the groups, and (iv) most invidiously, genetic differences between the groups that generate not only the ascriptive distinctions but also differences in intelligence and motivation. Second, at any moment, members of each group with given productivity-linked characteristics can be confronted with differential treatment of those characteristics in markets, especially labor markets. In short, conventional theory suggests that the observed gap in outcomes could be due to discrimination against group A and nepotism on behalf of group B.

Intergroup Disparity: Economic Theory and Social Science Evidence

Consider a hypothetical community where two groups are distinguished by an ascriptive characteristic or a set of ascriptive characteristics that are understood as separating markers by the members of each of the groups. Indeed, the distinguishing characteristics may be recognized by others external to the two groups or external to the community. Furthermore, these separating markers are associated with the social categories of race or ethnicity. Credible surveys taken by researchers reveal that, on average, the members of the two groups experience widely distinct economic outcomes. Members of group A are found to have significantly lower earnings, a higher incidence of unemployment, less prestigious occupations, lower levels of total income, and substantially lower levels of wealth than members of group B. Conventional economics offers two major explanations for the observed disparity between groups A and B. First, average productivity-linked endowments (or a human capital gap) correlate strongly with membership in each of these ascriptively bounded groups, producing the differences in outcome. The origins of these background differences have been attributed to a variety of causes. The four most prominent reasons offered for the wedge in human capital acquisition have been (i) an unequal allocation of social resources across the two groups, (ii) the intergenerational transmission of past disadvantage or advantage across the groups, (iii) somewhat invidiously, cultural differences between the groups, and (iv) most invidiously, genetic differences between the groups that generate not only the ascriptive distinctions but also differences in intelligence and motivation. Second, at any moment, members of each group with given productivity-linked characteristics can be confronted with differential treatment of those characteristics in markets, especially labor markets. In short, conventional theory suggests that the observed gap in outcomes could be due to discrimination against group A and nepotism on behalf of group B.

Black-White Wage Differential: The Relative Importance of Human Capital and Labor Market Structure

This article uses the decomposition analysis developed by Neumark and the 1987 CPS data to investigate the relative importance of human capital and labor market structure in explaining the observed wage differential between white males and blacks (both male and female). We find that labor market structure, as opposed to differences in human capital, explains a relatively large portion of the wage gap between white males and blacks. In addition to blacks and whites being paid different wages for the same work, they are also given unequal opportunities. This means that narrowing the human capital gap between the races will not be enough to close the wage gap, as argued by human capital theorists. It is equally important to pursue policies that provide access to higher paying jobs and industries for blacks.