The Effects of Higher Education on Productivity and Innovation

Author Name INUI Tomohiko (Gakushuin University) / IKEDA Yuya (NISTEP) / KAKINO Shingo (Gakushuin University)
Creation Date/NO. April 2021 21-P-009
Research Project East Asian Industrial Productivity
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This paper surveys the existing studies on the effects of the accumulation of human capital through higher education on the productivity of workers, and examines the effects of the presence of PhD holders in the firm on its innovation activities. According to past studies measuring the wage premium for postgraduate personnel in Japan, the wage premium for postgraduate graduates is about 20 ~ 30%. On the other hand, according to existing studies in the United States and the United Kingdom, the wage premium for postgraduates is estimated to be about 10 ~ 30%. The difference in the estimated wage premiums between US, UK, and Japan are not large. These past studies suggest the possibility that graduate school education in Japan contributes to worker productivity improvement with the accumulation of human capital to some extent.

It is expected that doctoral degree holders in a firm have significant learning capacity and have the effect of enhancing the performance of innovation activities of the firm. The effect of doctoral degree holders on the innovation activity of firms is analyzed by taking into account firm management practice. Our results indicate that firms with PhD holders are more likely to succeed in both product and process innovations in comparison to firms without PhD holders. The magnitudes of these effects are 4.5 percentage points and 3.8 percentage points higher, respectively. It is also shown that the management practice of providing favorable treatment to researchers has a positive effect in realizing innovation in the firm.