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Firms that use capital more intensively have a more qualified workforce

28.10.2022

In Portuguese firms there is a positive association between capital intensity and average wage. This is in line with the hypothesis of complementarity between capital and skills, which posits that unskilled labor is more easily substitutable for capital than skilled labor. Furthermore, this association has a non-linear shape, as successive increases in capital intensity are associated with smaller rises in workers' qualifications. The relationship between the two variables has a similar profile in manufacturing and services, but in the latter sector the average salary, for a given value of capital intensity, is lower than in manufacturing.

For more details see the Special Issue “Accumulation of production factors by Portuguese firms”, published in the Banco de Portugal Economic Bulletin of October 2022.

Prepared by Manuel Coutinho Pereira. The analyses, opinions and findings expressed above represent the views of the author and not necessarily those of Banco de Portugal or the Eurosystem.

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