Measurement of Labor Quality Growth Caused by Unobservable Characteristics

KOF Working Paper No. 203

23 Pages Posted: 26 Aug 2008  

Thomas Bolli

Independent

Mathias Zurlinden

affiliation not provided to SSRN

Date Written: July 2008

Abstract

The standard economy-wide indices of labor quality (or human capital) largely ignore the role of unobservable worker characteristics. In this paper, we develop a methodology for identifying the contributions of both observable and unobservable worker characteristics in the presence of the incidental parameter problem. Based on data for Switzerland over the period 1991-2006, we find that a large part of growth in labor quality is caused by shifts in the distribution of unobservable characteristics. The contributions to growth attributed to education and age are corrected downwards, if unobservable worker characteristics are taken into account. Yet the standard indices of labor quality appear to be robust to this extension.

Keywords: human capital, labor quality

JEL Classification: J24, J31

Suggested Citation

Bolli, Thomas and Zurlinden, Mathias, Measurement of Labor Quality Growth Caused by Unobservable Characteristics (July 2008). KOF Working Paper No. 203. Available at SSRN: https://ssrn.com/abstract=1259202 or http://dx.doi.org/10.2139/ssrn.1259202

Thomas Bolli (Contact Author)

Independent ( email )

No Address Available

Mathias Zurlinden

affiliation not provided to SSRN

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