Human Capital and Financial Development: Firm-Level Interactions and Macroeconomic Implications

Lian Allub, Pedro Gomes and Zoe Kuehn ()

No 1515, Research Department working papers from CAF Development Bank Of Latinamerica

Abstract: Capital-skill complementarity in production implies non-trivial interactions between availability of human capital and financial constraints. Firms that are constrained in their access to finance hire a lower proportion of skilled workers than unconstrained firms. On the other hand, higher wages of skilled workers reduce firms’ desired capital intensity and thus loosen their effective financial constraints. We build a dynamic occupational choice model to quantify how a lack of human capital and financial frictions, as well as the joint effect of both restrictions interact to explain cross-country differences in aggregate output per capita, productivity, average firm size and college premia. We calibrate our model to US data, and we vary financial frictions and educational attainment as observed across countries. We find that the joint effect of both restrictions is up to 50 percent larger compared to the sum of the individual effects. In countries with a negligible share of tertiary educated workers, financial development has small effects on aggregate output.

Keywords: Banca de desarrollo; Educación; Evaluación de impacto; Finanzas (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-bec, nep-dge and nep-fdg
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https://scioteca.caf.com/handle/123456789/1515

Related works:
Journal Article: Human Capital and Financial Development: Firm-Level Interactions and Macroeconomic Implications (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:dbl:dblwop:1515

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