Productivity, Human Capital Formation Policy, and Redistribution : Do Government Policies Promote Productivity?

Productivity is a most important determinant of national wealth and standards of living. Scholars have shown that different welfare production regimes pursue distinct human capital formation policies to promote productivity. But do those government policies actually promote the productivity of the economy? This paper analyzes whether such policies improve multifactor productivity in industrial democracies, after briefly presenting a human capital investment explanation for why they should help productivity. It finds that family and education policies promote productivity. Evidence of pro-productivity effects of ALMP is not detected. While the provision of public services with redistributive effects is productivity-enhancing, direct redistribution with taxes and transfers itself does not improve productivity, once other human capital formation policies are controlled for. Thus, the analysis finds good reason for governments to pursue human capital policies to promote productivity and ultimately standards of living, but they should do so selectively by choosing appropriate policy tools