Human Capital Spillovers and Plant Productivity in ASEAN: Evidence from the Plant Panel Data

This paper examines whether the local human capital spillovers can affect plant productivity in three ASEAN countries using panel data from World Bank Enterprise Survey between 2009 and 2015. The spillovers exist if plants can produce more in the region with the abundant number of skilled workers given their inputs. This study focuses on the proportion of nonproduction workers outside the plant as the proxy of skilled workers. I use augmented Cobb-Douglas production function to estimate this effect. Results suggest that human capital spillovers do matter for plant productivity. I find that a 1 percent increase in the proportion of nonproduction workers within a region will enhance the productivity of plants in that region by roughly 7.1–8.9 percent. Moreover, the productivity rises are found to be higher for low-tech plants. The economic value of such spillovers effect indicates that per plant value-added will increase by US$ 330,000 or correspondingly, an increase of US$ 866.75 million for the whole manufacturing industry. JEL codes: D24, J24, L25, L60