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

65 Pages Posted: 8 Sep 2014

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)

Date Written: September 1, 2014

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. In Germany, average innovation performance is higher in all industries, except for low-technology manufacturing, and in the Netherlands the innovation performance distributions are more dispersed. 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 for process innovation the most negative returns are observed in the best-performing enterprises of most industries. We find that in both countries 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 suggests an interpretation of a winner-takes-all market in knowledge-intensive services.

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 (September 1, 2014). ZEW - Centre for European Economic Research Discussion Paper No. 14-064. Available at SSRN: https://ssrn.com/abstract=2493008 or http://dx.doi.org/10.2139/ssrn.2493008

Eric J. Bartelsman

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 (Contact Author)

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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