Despite the fact that human capital is widely seen by economists as a key determinant of growth and productivity performance, surprisingly little is known about its quantitative dimensions before very recent times. In Discussion Paper No. 1036, Research Fellow Stephen Broadberry and Karin Wagner relate trends in the accumulation of human capital in Britain, Germany and the US to overall production strategy and productivity trends in an attempt to fill this void.

The authors obtain data on three aspects of human capital formation in manufacturing: the accumulation of shop-floor skills, managerial skills and research capabilities. The accumulation of these skills in different proportions in the three countries, and changes in the balance over time, are shown to have been shaped in relation to the development of overall production strategies. In the US, a strategy of standardized mass production led to high levels of labour productivity and concentration on the development of managerial capabilities, but neglect of the skills of the shop-floor labour force. In Britain and Germany, concentration on craft production led to greater emphasis on shop-floor skills. After the war, however, British firms made an unsuccessful move towards standardized mass production, while the Germans maintained a highly skilled shop-floor labour force; a strong position to take advantage of the information revolution from the 1960s. The switch to US methods was not very successful in Britain, where demand conditions and resource and factor endowments were rather different. Since the 1980s, Britain has returned to a more skilled labour intensive strategy, but still has a large skills gap to make up. The need to improve shop-floor labour qualifications is essential to fulfil this task.

Human Capital and Productivity in Manufacturing during the Twentieth Century: Britain, Germany and the United States
Stephen N Broadberry and Karin Wagner

Discussion Paper No. 1036, October 1995 (HR)