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Labor Substitutability among Schooling Groups

Author

Listed:
  • Mark Bils
  • Bariş Kaymak
  • Kai-Jie Wu

Abstract

Given worldwide trends in education, wage premium for schooling, and real GDP, we derive a lower bound for the long-run elasticity of labor substitution across schooling groups of around 4, which is far higher than values commonly used in the literature. We exploit our bound to reexamine the importance of human capital in cross-country income differences, including the roles of school quality versus the skill bias of technology in the greater efficiency gains from schooling in richer countries.

Suggested Citation

  • Mark Bils & Bariş Kaymak & Kai-Jie Wu, 2024. "Labor Substitutability among Schooling Groups," American Economic Journal: Macroeconomics, American Economic Association, vol. 16(4), pages 1-34, October.
    • Handle: RePEc:aea:aejmac:v:16:y:2024:i:4:p:1-34
    DOI: 10.1257/mac.20220288
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    More about this item

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • 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
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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