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Title:The importance of skill measurement for growth accounting PDF Logo
Authors:Nilsen, Øivind Anti
Raknerud, Arvid
Rybalka, Marina
Skjerpen, Terje
Issue Date:2010
Series/Report no.:Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 4997
Abstract:In a growth accounting context one usually constructs a quality adjusted index of labor services by aggregating over predefined groups of workers, using the groups' relative wage bills as weights. In this article we suggest a method based on decomposing individual predicted wages into a skill-related part and a part unrelated to skill, where the former consists of both observed and unobserved components. The predicted wages, associated with individual skill attributes, are sorted and classified into deciles. The median predicted skill-related wage in each decile is used to construct an alternative skill-adjusted index of labor services. We find that Total Factor Productivity (TFP) growth decreases significantly when using the latter method. This means that when using the alternative method one explains more of the growth in labor productivity than what a more traditional labor quality adjustment procedure does.
Subjects:TFP growth
skill measures
wage equation
JEL:C23
D24
J24
J31
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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