The Impact of Skills on Relative Productivity Performance at National Level: Exploring Channels of Influence

Abstract

Given the widespread emphasis on the importance o f increasing workforce skills in order to enhance productivity performance, it is perhaps surprising that the evidence on the contribution of human capital to inter-country differences in productivity performance is still mixed. Yet this is certainly the case. This paper argues that two main reasons why some studies fail to find a strong role for skills in explaining relative productivity performance at national level are difficulties in measuring skills adequately and failure to take account of the mechanisms or channels of influence by which skills may exert indirect effects on productivity. Examples of such channels of influence include the complementarities of skills with other production inputs and the contributions made by skilled workers to knowledge generation and exchange and to innovation processes. However, the paper cautions that, in any single country, increases in measured skills may indeed have no effect on relative productivity performance unless those skills are well matched to employer requirements and are effectively utilised within firms and other organisations.