AN ECONOMETRIC STUDY OF INTERNATIONAL AND INTERINDUSTRIAL DIFFERENCES IN LABOR PRODUCTIVITY,
Abstract
The report seeks to explain observed differences in output (value added) per man among developed countries and manufacturing industries. Drawing upon the method of statistical factor analysis, the report derives a new production function which distinguishes between skilled and unskilled labor. The analysis proceeds under certain basic assumptions. It is assumed, first, that the markets for goods and for labor are competitive; second, that industrial production functions are identical in all countries and exhibit constant returns to scale; and, third, that relative prices of manufactured goods are similar in all countries. It is not necessary that these assumptions apply strictly -- only that deviations from them be essentially random. These assumptions together with the production function constitute a simple statistical model, implying a specific pattern of wages. Statistical analysis of wage data confirms the existence of this pattern. An examination of data on rates of return on capital suggests that capital tends to be mobile among countries. For this reason, countries well endowed with skilled labor should export goods produced in skill-intensive industries. In fact, if one excludes industries where natural resources play a large role, this tendency is confirmed. (Author)
Document Details
- Document Type
- Technical Report
- Publication Date
- Dec 01, 1966
- Accession Number
- AD0644852
Entities
People
- Edward J. Mitchell
Organizations
- RAND Corporation