Understanding the Lack of Skill Specialization in Peru

Jobs in Peru use a larger number of skills than comparable jobs in the U.S. This lack of specialization is consistent with firms’ hiring of "toderos" (workers with many skills, do-it-alls), given the high levels of worker reallocation. Labor markets in poorer countries are characterized by higher worker reallocation rates.1 In richer economies, a dynamic labor market that seamlessly reallocates workers to jobs goes hand in hand with robust productivity growth and sustained income growth.2 Instead, in poorer countries, the brisk pace of reallocation is accompanied by high unemployment and under-employment risk and lower returns to human capital.3 In our research, we explore why fast-reallocating labor markets do not yield productivity enhancements.4 To do so, we use detailed microdata to provide new evidence on disparities in detailed job skills between a rich and a poorer country. While a preference for workers who are generalists is a response to an economic environment with a high turnover rate, the lack of specialization limits productivity growth.