Human Capital in the 21st Century: A Macroeconomic Perspective with a Special Reference to the Multidimensionality of Skills

• Applicant: Dr. Damir Stijepic
• Subject Area: Economic Theory ; Statistics and Econometrics
• Term: from 2019 to 2024
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 433336278

• Final Report Year: 2024

Final Report Abstract

At least since the human-investment revolution in economic thought in the 1960s, human capital is regarded as a key factor in production. This research project provides a new perspective on the role of human capital in the macroeconomic processes. The standard models stress the role of human capital in raising the productivity of a person at specific tasks in the production process of a firm. Beyond this effect, investments in human capital may be additionally valuable in the sense that suitable investments enhance the ability of a person to take advantage of potentially arising job opportunities. The idea is that it is not sufficient to be productive at a given task. It is also important to raise the chances of holding a suitable job at the right firm. Indeed, the recent literature stresses that the (re-)allocation of resources across firms is an important determinant of aggregate productivity. All in all, I complement the standard production-function perspective on human capital by introducing a new allocation channel. In a first set of intermediate findings, I document, in a large international comparison, that cognitive skills are positively associated with a person’s probability of being employed. Furthermore, countries with a higher average skill level tend to have higher employment rates. However, the latter relation only holds among advanced economies and it does not extend to less advanced economies. Indeed, the statistics suggest that the latter set of countries is further away from the technology frontier, employing technologies that are less skill-intensive. In a second set of intermediate findings, I document that the surge in job-to-job mobility over the last decades of the 20th century in the United States is offset by an equally remarkable decline in job-to-job mobility over the first decades of the 21st century. Job-to-job mobility in recent years is at the same levels as in the late 1970s—far below the peak levels of the late 1990s. The rise and fall in mobility are closely tied to skills. Higher educated workers lead the accelerating reallocation at the end of the 20th century and higher educated workers are at the center of the slowdown at the beginning of the 21st century. Motivated by the concurrent trend reversals around the turn of the millennium in skill demand and mobility together with trend breaks in U.S. IT-investment series, I explore Schumpeterian-style mechanisms in a large international comparison. Notably, while economic growth is associated with relatively higher job mobility among skilled workers, the prevalence of IT in the workplace is associated with relatively lower job mobility—potential remnant correlations of a major-technology adoption cycle. In an accompanying theoretical contribution, I link the heterogeneity in the adoption process of a major technology to the skill wage premium.

Publications

• Employment effects of skills around the world: Evidence from the PIAAC. International Labour Review, 159(3), 307-338.
  STIJEPIC, Damir
  
• Trends and cycles in U.S. job mobility. The Manchester School, 89(2), 203-222.
  Stijepic, Damir
  
• Workplace Heterogeneity and the Returns to Versatility. The B.E. Journal of Theoretical Economics, 22(2), 483-508.
  Stijepic, Damir
  
• Educational Disparity in Job Mobility: The Great Trend Reversal. SSRN Electronic Journal.
  Stijepic, Damir
  
• International Differences in the Effect of Skills on Job Mobility: A Schumpeterian Perspective
  Damir Stijepic