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Skilled Labor Productivity and Cross-Country Income Differences

Author

Listed:
  • Lutz Hendricks
  • Todd Schoellman

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.

Suggested Citation

  • Lutz Hendricks & Todd Schoellman, 2023. "Skilled Labor Productivity and Cross-Country Income Differences," American Economic Journal: Macroeconomics, American Economic Association, vol. 15(1), pages 240-268, January.
    • Handle: RePEc:aea:aejmac:v:15:y:2023:i:1:p:240-68
    DOI: 10.1257/mac.20200256
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    Citations

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    Cited by:

    1. Mikko Myrskylä & Julia Hellstrand & Sampo Lappo & Angelo Lorenti & Jessica Nisén & Ziwei Rao & Heikki Tikanmäki, 2024. "Declining fertility, human capital investment, and economic sustainability," MPIDR Working Papers WP-2024-002, Max Planck Institute for Demographic Research, Rostock, Germany.
    2. Jan Trenczek & Konstantin M. Wacker, 2023. "Accounting for cross-country output differences: A sectoral CES perspective," Working Papers 2023.09, International Network for Economic Research - INFER.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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