Essays on Skills, Management and Productivity
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The London School of Economics and Political Science Essays on Skills, Management and Productivity Anna Sivropoulos-Valero A thesis submitted to the Department of Economics of the London School of Economics for the degree of Doctor of Philosophy, London, July 2018. Declaration I certify that the thesis I have presented for examination for the PhD degree of the London School of Economics and Political Science is solely my own work other than where I have clearly indicated that it is the work of others (in which case the extent of any work carried out jointly by me and any other person is clearly identified in it). The copyright of this thesis rests with the author. Quotation from it is permitted, provided that full acknowledgement is made. This thesis may not be reproduced without the prior written consent of the author. I warrant that this authorisation does not, to the best of my belief, infringe the rights of any third party. I declare that my thesis consists of 49,391 words (as calculated by texcount utility in Overleaf). London, 18th July 2018 Anna Sivropoulos-Valero 2 Statement of conjoint work I confirm that Chapter 1, “The Economic Impact of Universities: Evidence from Across the Globe”, was jointly co-authored with Professor John Van Reenen. A previous version of this paper has been published as CEP Discussion Paper No 1444 (August 2016, revised January 2018) and NBER Working Paper No. 22501 (August 2016). After submission of this thesis in July 2018, this paper was accepted for publication at the Economics of Education Review. This statement is to confirm that I contributed 50 per cent of this work. I confirm that Chapter 3, “Skill Biased Management: Evidence from Manufacturing Firms”, was jointly co-authored with Andy Feng. This paper is the result of merging our two related but previously separate papers. My original work, which built significantly on my MRes paper, “Skill-Biased Management: Evidence from European Manufacturing Firms” (2011), focused on relating firm management practices to measures of regional skills and regional skill premia (based on international labour force data) and university presence. Andy Feng’s original paper, “Human Capital and Management Practices: Ev- idence from Driving Times to Universities”, was Chapter 2 of his 2013 thesis, “Human Capital and Management Practices” (http://etheses.lse.ac.uk/id/eprint/787). This paper analysed the relationship between firm management practices and distance to closest university. This statement is to confirm that I contributed 50 per cent of the work in this merged paper. This includes my original analysis, together with updating all analysis for consistency, extending it in places, and drafting this latest version of the paper. I confirm that Chapter 4, “Industry in Britain: An Atlas”, was jointly co-authored with Sandra Bernick and Richard Davies. This paper has been published as a CEP Special Paper No 34 (September 2017). This statement is to confirm that I contributed 33 per cent of this work. Anna Sivropoulos-Valero 3 Disclaimers Chapter 2, “The Local Economic Impact of Universities: Evidence from UK firms”, makes use of confidential data collected by the UK Office for National Statistics and securely provided by the UK Data Service. The following disclaimer applies: This work contains statistical data from the ONS, which is Crown Copyright. The use of ONS statistical data does not imply the endorsement of the ONS in relation to the interpretation or analysis of the data. This work uses research datasets, which may not exactly reproduce National Statistics aggregates. 4 Acknowledgements I would like to thank John Van Reenen for his excellent supervision and guidance through- out my PhD, I have learned so much from him both in terms of how to approach academic research, and how to translate it into the real world. I have greatly appreciated his advice and patience over these years. I am also very grateful to Alan Manning for taking me on as a student, I have gained immensely from his perspectives and encouragement. As an adviser in the earlier years of my PhD, Luis Garicano also provided invaluable advice. These professors and others at the LSE/CEP have provided a constant source of inspiration. I am grateful for the opportunity I have had to work on the LSE Growth Commission with Tim Besley, Stephen Machin and Nick Stern. I am also indebted to Swati Dhingra, Ralf Martin, Sandra McNally, Guy Michaels, Max Nathan, Henry Overman and Catherine Thomas for their support. I thank Margaret Bray for providing me with the opportunity to do the PhD, and for convincing me that it was a good idea. I also thank my co-authors Andy Feng, Richard Davies and Sandra Bernick who I have enjoyed working with and learning from. I have been incredibly lucky to be part of the CEP, an inspiring and collaborative community of researchers. I thank Jo Cantlay, Linda Cleavely, Helen Durrant, Harriet Ogborn, Nigel Rogers, Tajender Sagoo, Mary Yacoob and Nic Warner for all their support and for making it a great place to work. I thank Mark Wilbor and Loraine Evans for their help and understanding. I am grateful for financial support from the CEP and the ESRC which has enabled me to do this work. Friends I have made during my time at the LSE have shared the highs and lows at various stages, and made it all the more enjoyable. These include Esther Ann Bøler, Lena Boneva, Alex Clymo, Zack Cooper, Réka Juhász, Laure de Preux Gallone, Isabelle Roland, Rosa Sanchis-Guarner, Claudia Steinwender and Katalin Szmerédi; together with other colleagues and room-mates at the CEP. I thank my family for supporting me throughout my life, for giving me so many opportunities, and for making me feel that anything is possible. I thank my friends who have encouraged me and been there when I needed them; and Joanna who has helped me balance work and home. Finally, I am grateful to my husband Timothy who encouraged me to pursue this course, knowing the pressures and challenges it would bring, but knowing also first hand the fulfillment that comes from academic research and intellectual curiosity. He has been a great support, and I appreciate his pragmatism and patience. I dedicate this PhD to my daughters Sofia and Alexia, the lights of my life, who have brought me joy, purpose and perspective, and who I hope will grow up remembering that in life the journey - and what we learn from it - is more important than the destination. 5 Abstract This thesis investigates the role of skills and universities in explaining differences in eco- nomic performance between firms and regions. The first chapter examines the relationship between university entry and GDP growth between 1950 and 2010 based on new data that combines university entry in 1,500 regions across 78 countries. It finds that a 10% increase in a region’s universities is associated with 0.4% higher GDP per capita in that region, with evidence of spillovers to neighbouring regions. Part of the university effect appears to be mediated through increases in human capital and innovation, and we also find evidence that universities shape views on democracy. Focusing on the UK, the second chapter studies how university growth impacts on local industry composition and productivity using panel data on firms and nearby university enrolments over the period 1997-2016. This spatial analysis reveals that university growth stimulates high-tech start-ups and the effects are stronger for higher quality, research intensive universities and areas of higher initial human capital. Employment effects are more muted, though smaller establishments appear to get larger as universities grow. On average, positive productivity impacts are found only in more high-tech intensive areas. The third chapter provides evidence for a complementarity between modern manage- ment practices and higher education using data on manufacturing firms, universities and labour markets across 19 countries. It finds that firms further from universities have lower management scores, even when controlling for a rich set of observables and region fixed effects. Analysis using estimates of regional skill premia suggests that variation in the price of skills drives these effects. The fourth chapter examines differences in economic performance across the UK using a variety of data sources and measures. Ten stylised facts are presented which are relevant for policymakers and researchers engaged in the development of industrial strategy in the UK. 6 Contents 1 The Economic Impact of Universities: Evidence from Across the Globe 17 1.1 Introduction.................................... 18 1.2 Data......................................... 22 1.2.1 World Higher Education Database................... 22 1.2.2 The Worldwide Diffusion of Universities............... 23 1.2.3 Regional Economic Data......................... 25 1.3 Empirical Framework.............................. 27 1.4 Results....................................... 30 1.4.1 Basic Relationships............................ 30 1.4.2 Main Results............................... 32 1.4.3 Robustness and Heterogeneity..................... 34 1.4.4 Geographical Spillover Effects of Universities............ 39 1.4.5 Magnitudes................................ 42 1.5 Mechanisms.................................... 44 1.5.1 Human Capital.............................. 44 1.5.2 Innovation................................. 46 1.5.3 Institutions and Democracy....................... 46 1.5.4 Demand.................................. 49 1.5.5 Summary on Mechanisms........................ 50 1.6 Conclusions.................................... 50 1.A Data Appendix.................................. 57 1.A.1 WHED Coverage............................. 57 1.A.2 Validating Our Approach........................ 57 1.A.3 Describing Country Level University Growth in Selected Countries 59 1.A.4 Case Studies of University Expansion in Selected European Countries 61 7 1.B Further Results.................................. 62 1.B.1 Specification and Sample Checks.................... 62 1.B.2 Simulation of the Effects of a New University on the Average Re- gion’s Human Capital and GDP.................... 64 1.B.3 Demand Effects of Universities....................