Market frictions, misallocation of talent and development

Fernando Barros Jr () and Bruno Delalilbera ()
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Fernando Barros Jr: Department of Economics - FEARP/USP and FGV EPGE Brazilian School of Economics and Finance
Bruno Delalilbera: FGV EPGE Brazilian School of Economics and Finance

Economics Bulletin, 2018, vol. 38, issue 4, 2410-2430

Abstract: We identify a negative relationship between teachers' wage and regional income in the Brazilian data. To explain this fact, we propose a general equilibrium model where workers' decision are distorted due to market frictions and teachers' quality is calculated endogenously as an input for the formation of human capital. Our model is calibrated to Brazilian scenario, matching data and closely reproducing share of workers and the average wage for each state and occupation. Our benchmark economy suggests that there is a misallocation of workers in the Brazilian economy and a reallocation of high skilled workers to teachers' occupation could increase GDP due to a multiplicative effect of teachers' human capital. We also find that the outside options to teachers' career in less developed states are worst than in richer states. This contributes to higher talented workers to choose the teacher's career in poorer states.

Keywords: Labor Misallocation; Human Capital; Occupation Choice (search for similar items in EconPapers)
JEL-codes: J2 O4 (search for similar items in EconPapers)
Date: 2018-12-13
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Citations: View citations in EconPapers (1)

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