UKCES

The SSDA commissions research to develop understanding of key areas around its strategic goals, one of which is to work with partners to deliver improvements in productivity and business performance through skills development. This research project, undertaken for the SSDA by NIESR, seeks to explore the contribution of skills to productivity and in particular to understand sectoral differences in international productivity variations and the impact of skills.

In the light of research evidence that workforce skills and training are positively related to productivity performance at sector and firm level, it is perhaps surprising that some international comparisons of relative productivity performance at sector and national level only attribute relatively small proportions of the identified productivity gaps to cross-country differences in workforce skill levels.

In this study we identify a number of reasons why the impact of skills on relative performance at sector and national level may not be captured through standard growth accounting and regression techniques used in earlier international comparisons, for example:

• Difficulties in measuring skills.
• Misspecification of production functions in econometric analysis.
• Failure to take account of potential complementarities between skills and other production inputs.
• Failure to take account of mechanisms by which skills may have an indirect impact on productivity at sector and national level, for example, by contributing positively to the generation and distribution of economically valuable knowledge.