Productivity Gap between Sectors and Double Duality in Labor Markets

Elise S. Brezis, Brand Gilad Brand

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

Over the last decades, productivity in the tradable sector rose substantially, while in the non-tradable sector, output per worker has remained the same, despite a similar increase in human capital in both sectors. This paper shows that a double duality both in the production and the higher-education sectors as well as heterogeneous ability of individuals might explain the differences in labor productivity between tradable and non-tradable industries. The double duality in the economy enables a separation of individuals by their ability, and in consequence, human capital in both industries is different. The heterogeneity in human capital can explain that despite an increase in human capital in both sectors there is still a gap in productivity and in wage premium. In other words, the productivity gap between sectors is fueled by the double duality in labor markets, leading to heterogeneity in human capital. In consequence, there is a contrast between on one hand, more mobility across countries, and on the other hand, less mobility between sectors.

Original languageEnglish
Pages (from-to)725-749
Number of pages25
JournalOpen Economies Review
Volume29
Issue number4
DOIs
StatePublished - 1 Sep 2018

Bibliographical note

Publisher Copyright:
© 2018, Springer Science+Business Media, LLC, part of Springer Nature.

Keywords

  • Ability
  • Duality
  • Higher education
  • Human capital
  • Productivity
  • Services
  • Skills
  • Tradable goods
  • Wage premium

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