The Effect of Human Capital, Spillovers on Plant Productivity and Technical Efficiency：Evidence from Taiwan Manufacturing Industries
Date Issued
2010
Date
2010
Author(s)
Chang, Ching-Fu
Abstract
This dissertation examines three empirical studies on the role of human capital in plant production. In the first study, we investigate the relationship between workforce composition and plant productivity among manufacturing industries in Taiwan. Based on an unique employer-employee matched data, we estimate production function using three alternative indices of plant productivity (including value added, Solow residuals, as well as Levinsohn and Petrin(2003) total factor productivity) and various workforce and plant characteristics (including the distribution of workers’ age, gender, educational level, the ratio of foreign workers, plant age, scale and wage dispersion). We find that larger plants, plants that employ a higher fraction of male, younger, higher educated workers and plants with less dispersion of wages perform better than others. Furthermore, hiring foreign workers is beneficial for plant productivity but the benefit decreases as the ratio of foreign workers rises. Finally, plants that employ a higher fraction of older workers would pay higher wages. Raising the hiring ratio of foreign workers is beneficial for the wage of skilled workers, but is harmful for the wages of unskilled workers. This indicates that there is a complementary relationship between foreign and skilled workers and a substitute relationship between foreign and unskilled workers.
In the second study, we apply the stochastic frontier model proposed by Battese and Coelli(1995) to investigate the relationship between human capital and technical efficiency among 23 two-digit manufacturing industries. Using an array of workforce characteristics such as measures of human capital, we find that the estimates of output elasticity with respect to labor are between 0.71 and 0.99, with the highest for leather industry, while the estimates of output elasticity respect to physical capital is between 0.13 and 0.36, with the highest for petrol and coal industry. Also, the coefficient of return to scale is largest for electronic industry. In efficiency analysis, the average technical efficiency for all industries is between 0.61 and 0.78. Further, employing a higher fraction of younger and high educational workers can improve the technical efficiency, but the former effect is only in labor or physical-strength intensive industries while the latter effect decreases as the average educational level of worker raises. Finally, hiring foreign workers is positively correlated with the technical efficiency for all industries, which implies that hiring foreign workers may stimulate native workers to work harder, and therefore, to be more efficient.
In the third study, we try to identify the existence and magnitude of human capital spillovers from production function. We measure the productivity gains as the college share of workers outside the plant within a city rises. However, there are some potential sources of endogeneity that may result in biased estimates. Consequently, we utilize multiple fixed effects as well as instrumental variables to cure the endogenous problem. Also, we carry out a series of specification and robustness checks. Our results show that one percentage increase in the college share outside the plant within a city will raise plant productivity by 0.93~1.15% and the effects are higher among high-tech plants and plants that belong to “Science Park” regions. Moreover, the spillovers between industries that are economically similar are stronger than spillovers between industries economically dissimilar. Finally, to assess the pecuniary benefits of spillovers, we find that one percentage increase in the college share of workers will increase the value added of each plant by about 13,000 NT dollars.
Subjects
human capital
employer-employee matched data
worker composition
foreign worker
productivity
technical efficiency
spillover effect
SDGs
Type
thesis
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