Decomposing the Labor Productivity Gap between Upper-Middle-Income and High-Income Countries
Using firm-level survey data on registered private firms collected by the World Bank's Enterprise Surveys, this paper compares the level of labor productivity in 22 upper-middle-income countries and 11 high-income countries for which comparabl...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/282911575384211889/Decomposing-the-Labor-Productivity-Gap-between-Upper-Middle-Income-and-High-Income-Countries http://hdl.handle.net/10986/33017 |
| Summary: | Using firm-level survey data on
registered private firms collected by the World Bank's
Enterprise Surveys, this paper compares the level of labor
productivity in 22 upper-middle-income countries and 11
high-income countries for which comparable data are
available. The results show that labor productivity in the
upper-middle-income countries is about 57.5 percent lower
than in the high-income countries. The productivity
difference is robust and holds for firms of different sizes
and industries. The analysis uses the Oaxaca-Blinder
decomposition to identify the sources of the productivity
gap. It finds that the endowment effect and the structural
effect contribute roughly equally to the productivity gap.
Several firm- and country-level variables determine the
productivity gap. The biggest contributors via the endowment
effect include tertiary education attainment, law and order,
and quality management proxied by international quality
certification. Factors that contribute most via the
structural effect include market size, secondary education
attainment, and law and order. Thus, the results underline
the importance of human capital, institutions, and market
size for closing the productivity gap between the
upper-middle-income and high-income countries. |
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