The Role of Human Capital in Manufacturing Plant Growth: Evidence from Taiwan

Abstract

In this study, we set out to investigate the potential relationships between plant growth and size, age and human capital using a unique employer-employee matched data set for the Taiwanese manufacturing industry from 1998 to 2005. The general assumption of a reduction in plant growth with increases in plant size and plant age is confirmed by our manufacturing industry data set, while plant growth increases with the stock of human capital, albeit at a diminishing rate, thereby implying a positive concave relationship between plant growth and human capital. Moreover, we find that for plants with higher levels of human capital, the reduction in plant growth is more moderate with regard to size than with regard to age, indicating that differences in the stock of human capital within plants will tend to lead to differences in the patterns of age and size impacts on such plants' growth. Finally, substantial differences were observed among the influences of the various characteristics on plants with high, moderate and low growth in size.