Allocation of Human Capital and Innovation at the Frontier: Firm-Level Evidence on Germany and the Netherlands

64 Pages Posted: 23 Aug 2013

See all articles by Eric J. Bartelsman

Eric J. Bartelsman

Vrije Universiteit Amsterdam; Tinbergen Institute; IZA Institute of Labor Economics

Sabien Dobbelaere

Vrije Universiteit Amsterdam - Department of Economics; Tinbergen Institute; IZA Institute of Labor Economics

Bettina Peters

Center for European Economic Research (ZEW)

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Abstract

This paper examines how productivity effects of human capital and innovation vary at different points of the conditional productivity distribution. Our analysis draws upon two large unbalanced panels of 6,634 enterprises in Germany and 14,586 enterprises in the Netherlands over the period 2000-2008, considering 5 manufacturing and services industries that differ in the level of technological intensity. Industries in the Netherlands are characterized by a larger average proportion of high-skilled employees and industries in Germany by a more unequal distribution of human capital intensity. Except for low-technology manufacturing, average innovation performance is higher in all industries in Germany and the innovation performance distributions are more dispersed in the Netherlands.In both countries, we observe non-linearities in the productivity effects of investing in product innovation in the majority of industries. Frontier firms enjoy the highest returns to product innovation whereas the most negative returns to process innovation are observed in the best-performing enterprises of most industries. In both countries, we find that the returns to human capital increase with proximity to the technological frontier in industries with a low level of technological intensity. Strikingly, a negative complementarity effect between human capital and proximity to the technological frontier is observed in knowledge-intensive services, which is most pronounced for the Netherlands. Suggestive evidence for the latter points to a winner-takes-all interpretation of this finding.

Keywords: human capital, innovation, productivity, quantile regression

JEL Classification: C10, I20, O14, O30

Suggested Citation

Bartelsman, Eric J. and Dobbelaere, Sabien and Peters, Bettina, Allocation of Human Capital and Innovation at the Frontier: Firm-Level Evidence on Germany and the Netherlands. IZA Discussion Paper No. 7540. Available at SSRN: https://ssrn.com/abstract=2314835

Eric J. Bartelsman (Contact Author)

Vrije Universiteit Amsterdam ( email )

Amsterdam, ND North Holland
Netherlands
+31 (0)20 44 46044 (Phone)

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Sabien Dobbelaere

Vrije Universiteit Amsterdam - Department of Economics ( email )

De Boelelaan 1105
NL- Amsterdam, NL-1081 HV
Netherlands
0031 20 598 28 74 (Phone)

Tinbergen Institute

Keizersgracht 482
NL- Amsterdam, NL-1017 EG
Netherlands

IZA Institute of Labor Economics

P.O. Box 7240
D- Bonn, 53072
Germany

Bettina Peters

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany
+496211235174 (Phone)
+496211235170 (Fax)

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