Transcript Labor Productivity Growth in the United States 1995 – 2003

Knowledge, Human Capital, Markets and Economic
Growth in Modern Economies
June 2, 2005
Beijing, China
China Center for Economic Research
Gary S. Becker
University of Chicago
An Investment in Knowledge Pays the Best Interest
Investment in Human Capital as percentage of GDP
United States - 2001
17 – 25+
Percent
9 - 11%
Schooling
4 – 6%
On the Job Training
4 – 8%
Health
???
Adult Education
Sources: Own calculations based on World Health Organization and, UNESCO, UIS Global Statistics.
Wage Premiums by Education Level
United States
1963 - 2001
Source: Murphy, Erin S. “How pervasive are the Gains from Schooling.” St. Norbert College, Working
Paper, April 2003.
Change in College/High School Wage Gap for European Countries
Cohorts Specific Changes
Born 1940 - 1949
Born 1950 - 1959
Years
80s
90s
% Change
80s
90s
%Change
Austria
0.55
0.50
-8.4 %
0.32
0.37
15.6%
85, 97
Denmark
0.18
0.27
54.8%
0.14
0.27
95%
85, 95
Finland
0.38
0.44
15.9%
0.36
0.38
3.8%
87, 93
France
0.32
0.33
4.4%
0.35
0.35
1.1%
90, 98
Germany
0.40
0.48
18.9%
0.38
0.41
9.2%
85, 97
Italy
0.19
0.32
66.1%
0.24
0.28
13%
87, 98
Netherlands
0.27
0.18
-33.3%
0.16
0.19
16.4%
86, 96
Portugal
0.18
0.40
123.6%
0.46
0.57
22.6%
85, 93
Switzerland
0.33
0.35
5.4%
0.28
0.32
14.5%
92, 98
UK
0.27
0.28
3%
0.20
0.30
50.2%
85, 95
Source: Brunello, Giorgio, Simona Comi and Claudio Lucifora. The College Wage Gap in 10 European Countries: Evidence from Two
Cohorts. IZA Discussion Papers 228, Institute for the Study of Labor (IZA), 2000.
Returns to Education - China
1988, 2002
Year
Sample
Rate of Return to
Education
Adjustment for
Income Growth in
Future
1988
Urban
3.3%
9.3%
2000
Urban
11.1%
17.1%
Sources: 1988: Johnson, Emily N., and Chow, Gregory C. (1997). 2000: Heckman and Li (2003).
Returns to Education - Japan
2000
Year
Rate of Return to
Education
2000
8%
Source: Blondal (2002) .
Returns to English and Schooling by Year- Men Aged 30-55 - India
1980-2000
0 .2 5
0.25
English
E ng lis h
Schooling
S cho o ling
0 .2
0.20
Adjustment for Income
Growth in Future:
0 .1 5
0.15
10% + 4% = 14%
0 .1
0.10
0 .0 5
0.05
00
1980
1980
1985
1985
1990
1990
1995
1995
Source: Provided by Mark R. Rosenzweig from his own calculations.
2000
2000
Labor Productivity Growth
United States
1995 – 2005
10
9
8
7
%
6
5
4
3
2
1
0
95 96 97 98 99 00 01 02 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
19 19 19 19 19 20 20 20 3 - 3 - 3 - 3 - 4 - 4 - 4 - 4 - 5 0
0
0
0
0
0
0
0
0
20 20 20 20 20 20 20 20 20
Source: Bureau of Labor Statistics.
Total Factor Productivity (TFP) in Non-Agriculture
United States
1800 – 1940
TFP non-agricultural sector
2
1.8
1.6
1800-1840
1840-1900
1900-1929
1.4
1929-1940
→
→
→
→
0.79
0.73
1.63
1.78
1.2
1
0.8
0.6
0.4
0.2
0
1800 1810 1820 1830 1840 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940
Source: Greenwood, J., and Seshadri, A. "The U.S. Demographic Transition". AEA Paper and Proceedings, 2002.
Age-Earnings profile for Males
United States - 2005
8.4
8.2
Ln Monthly Earnings
8
7.8
7.6
7.4
7.2
7
6.8
6.6
16-19
20-24
25-34
35-44
Age
Source: Bureau of Labor Statistics.
45-54
55-64
65 +
Age-Earnings profile for Males
Japan - 2002
13.5
Ln Monthly Earnings
13.0
12.5
12.0
11.5
11.0
17
18 - 19
20 - 24
25 - 29
30 - 34
35 - 39
40 - 44
45 - 49
50 - 54
55 - 59
60 - 64 65 age +
Age
Source: Statistics and Information Department Minister's Secretariat. Ministry of Health, Labour
and Welfare, Japan.
Economic Gains from Reductions in Mortality
United States – 1970-1998
Aggregate Gains (billions of $1996)
1970-80
1980-90
1990-98
1970-98
Males
21,215
12,139
13,223
46,577
Females
15,863
6,979
3,461
26,303
Total
37,078
19,117
16,685
72,880
Source: Murphy, K.M., and Topel, R. H. The Economic Value of Medical Research. In Measuring the
Gains from Medical Research: An Economic Approach, edited by K.M. Murphy and R. H. Topel. Chicago:
The University of Chicago Press. 2003.
The Economic Value of Reducing Cancer and Heart Diseases
Mortality by 10% for the Total Population in United States
Disease Category
Increase in Value of Life
(Billions of Dollars)
Total Population
Cancer
$4,359
Heart Diseases
$4,085
Source: Murphy, K.M., and Topel, R. H. 2003. The Economic Value of Medical Research. In Measuring the
Gains from Medical Research: An Economic Approach, edited by K. M. Murphy and R.H. Topel, The University
of Chicago Press, 2003.
Cross-Country Regression to the Mean in Income per Capita
1960-2000
2.5
y = 2.1 - 0.13 * x
ln(Inc 2000) - ln(Inc 1960)
2
1.5
1
0.5
0
6
7
8
9
10
-0.5
-1
ln(Income 1960)
weighted regression
Source: Becker, G. S., Philipson, T., and Soares, R. The Quantity and Quality of Life
and the Evolution of World Inequality. American Economic Review, forthcoming.
Cross-Country Regression to the Mean in Full-Income
1960-2000
2.5
y = 3.4 - 0.26 * x
ln(Full Inc 2000) - ln(Inc1960)
2
1.5
1
0.5
0
6
7
8
9
10
-0.5
-1
ln(Income 1960)
weighted regression
Source: Becker, G. S., Philipson, T., and Soares, R. The Quantity and Quality of Life
and the Evolution of World Inequality. American Economic Review, forthcoming.
The Heritage Foundation/Wall Street Journal Index of
Economic Freedom
2005
Rank - Economic Freedom
(Out of 155 countries)
Country
1
Hong Kong
2
Singapore
3
Luxembourg
4
Estonia
5
Ireland
6
New Zealand
7
United Kingdom
8
Denmark
9
Iceland
10
Australia
39
Japan
112
China
118
India
Basically China ranks low in the following items:
• Trade Policy (but 1 point better than in 2004)
• Fiscal Burden (0.3 points better than in 2004)
• Foreign investment
• Banking and Finance: Four state-owned banks, which have a
combined market share of nearly 70 percent, dominate the
banking sector.
• Property Rights: China's judicial system is weak. The
Economist Intelligence Unit reports that "many [foreign firms]
prefer arbitration because of concerns about the speed and
impartiality of the courts.
• Regulation
Japan ranks low in the following items:
• Fiscal Burden: In 2003, government expenditures as a share of
GDP decreased 0.4 percentage point to 38.3 percent, compared
to a 0.6 percentage point increase in 2002.
• Banking and Finance: Japan’s banking system, although
competitive, suffers from a large number of non-performing
loans. Banks often make loans on criteria other than
creditworthiness.
• Regulation: According to the U.S. Department of Commerce,
“Japan’s reputation for protectionism and red tape…is well
deserved…. [T]he Japanese economy remains over-regulated
and those regulations can be used to hinder foreign firms’
attempts to gain access to the market.”
Conclusions
•
Human Capital has become increasingly important.
•
Showed growth in returns to schooling, health.
•
On the job training also important
•
Perhaps in midst of technological revolution that will last for
decades.
•
Human capital investment requires flexible economic system
to be most productive: Capital markets, labor and product
markets.