Are Manufacturing Workers Really Worth Their Pay? WPS/94-12

That is, countries with more skilled labour should have higher productivity than countries with less skilled workers, 1 holding all factors constant. Bartel and Lichetenberg (1987) show that firms with new capital stock have a higher demand for educated workers 2 relative to uneducated workers because skilled workers are able to implement innovations more quickly and thereby reduce a firm's costs of adjustment. Layard and Fallon (1975) run crosscountry production functions on 23 countries to test thècapital-skilì 3 complementarity hypothesis. They find that the share of physical capital in national income falls as the share of human capital rises. Quite a substantial literature was written during the 1970s on the effects of education on farmer efficiency. See Lockheed 4 et al (1980) for a good summary of the main findings of these studies.