Research Report The Relationship Between Human Capital, Productivity and Market Value
Building Up from Micro Evidence
John Abowd, John Haltiwanger, Ron Jarmin, Julia Lane, Paul Lengermann, Kristin McCue, Kevin McKinney, Kristin Sandusky
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This paper investigates and evaluates the direct and indirect contribution of human capital to business productivity and shareholder value. The impact of human capital may occur in two ways: the specific knowledge of workers at businesses may directly increase business performance, or a skilled workforce may also indirectly act as a complement to improved technologies, business models or organizational practices. We use newly created firm-level measures of workforce human capital and productivity to examine links between those measures and the market value of the employing firm. The new human capital measures come from an integrated employer-employee data base under development at the US Census Bureau. We link these data to financial information from Compustat at the firm level, which provides measures of market value and tangible assets. The combination of these two sources permits examination of the link between human capital, productivity, and market value. There is a substantial positive relation between human capital and market value that is primarily related to the unmeasured personal characteristics of the employees, which are captured by the new measures.
Research Areas Economic mobility and inequality Wealth and financial well-being
Tags Workplace and industry studies Employment and income data Income and wealth distribution
Policy Centers Center on Labor, Human Services, and Population