Skilled Labor Productivity and Cross-Country Income Differences

Lutz Hendricks and Todd Schoellman

American Economic Journal: Macroeconomics, 2023, vol. 15, issue 1, 240-68

Abstract: This paper revisits the question of how allowing for imperfect substitution among workers with different skill levels affects the results of development accounting. We consider a range of models that nest the approaches in the literature and calibrate them to a common set of moments, including particularly evidence on the wage gains of migrants. We obtain two main results. First, human capital accounts for between one-half and three-fourths of cross-country income gaps. Second, human capital accounts for only modest variation in the relative productivity of skilled versus unskilled labor.

JEL-codes: E24 E25 J22 J23 J24 J31 J61 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1257/mac.20200256

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