Human capital , innovation , productivity , quantile regression
Abstract:
This paper examines how productivity effects of human capital and innovation vary at dif-
ferent points of the conditional productivity distribution. Our analysis draws upon two large
unbalanced panels of 6,634 enterprises in Germany and 14,586 enterprises in the Netherlands
over the period 2000-2008, considering 5 manufacturing and services industries that differ
in the level of technological intensity. Industries in the Netherlands are characterized by a
larger average proportion of high-skilled employees and industries in Germany by a more un-
equal distribution of human capital intensity. In Germany, average innovation performance
is higher in all industries, except for low-technology manufacturing, and in the Netherlands
the innovation performance distributions are more dispersed. In both countries, we observe
non-linearities in the productivity effects of investing in product innovation in the majority
of industries. Frontier firms enjoy the highest returns to product innovation whereas for
process innovation the most negative returns are observed in the best-performing enterprises
of most industries. We find that in both countries the returns to human capital increase with
proximity to the technological frontier in industries with a low level of technological intensity.
Strikingly, a negative complementarity effect between human capital and proximity to the
technological frontier is observed in knowledge-intensive services, which is most pronounced
for the Netherlands. Suggestive evidence suggests an interpretation of a winner-takes-all
market in knowledge-intensive services.
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