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Experience Matters: Human Capital and Development Accounting

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  • David Lagakos
  • Benjamin Moll
  • Tommaso Porzio
  • Nancy Qian

Abstract

The current consensus in the development accounting literature is that differences in aggregate human and physical capital stocks across countries account for less than half of cross-country income differences. This literature has found that taking human capital from experience into account does not change the explanatory power of human capital. In this paper, we document a new fact that suggests a different conclusion. We find that experience-wage profiles are flatter in poorer countries than in richer countries. Taking this into account substantially increases the contribution of human and physical capital in development accounting.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18602.

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Date of creation: Dec 2012
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Handle: RePEc:nbr:nberwo:18602

Note: DEV EFG LS
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  1. Fatih Guvenen & Burhanettin Kuruscu & Serdar Ozkan, 2013. "Taxation of human capital and wage inequality: a cross-country analysis," Finance and Economics Discussion Series 2013-20, Board of Governors of the Federal Reserve System (U.S.).
  2. Jesper Bagger & Francois Fontaine & Jean-Marc Robin, 2014. "Tenure, experience, human capital and wages: a tractable equilibrium search model of wage dynamics," CeMMAP working papers CWP12/14, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  3. Todd Schoellman, 2012. "Education Quality and Development Accounting," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 388-417.
  4. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
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  7. Fatih Guvenen, 2007. "Learning Your Earning: Are Labor Income Shocks Really Very Persistent?," American Economic Review, American Economic Association, vol. 97(3), pages 687-712, June.
  8. Andres Erosa & Tatyana Koreshkova & Diego Restuccia, 2007. "How Important is Human Capital? A Quantitative Theory Assessment of World Income Inequality," Working Papers tecipa-280, University of Toronto, Department of Economics.
  9. Jesse Perla & Christopher Tonetti, 2012. "Endogenous Risk and Growth," 2012 Meeting Papers 479, Society for Economic Dynamics.
  10. Erik Hurst & Geng Li & Benjamin Pugsley, 2011. "Are household surveys like tax forms: evidence from income underreporting of the self-employed," Finance and Economics Discussion Series 2011-06, Board of Governors of the Federal Reserve System (U.S.).
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  12. Nicholas Bloom & Aprajit Mahajan & David McKenzie & John Roberts, 2010. "Why Do Firms in Developing Countries Have Low Productivity?," American Economic Review, American Economic Association, vol. 100(2), pages 619-23, May.
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  15. Todd Schoellman & Berthold Herrendorf, 2012. "Why is Measured Productivity so Low in Agriculture?," 2012 Meeting Papers 75, Society for Economic Dynamics.
  16. Azariadis, Costas, 1988. " Human Capital and Self-Enforcing Contracts," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(4), pages 507-28.
  17. Mark Aguiar & Erik Hurst, 2013. "Deconstructing Life Cycle Expenditure," Journal of Political Economy, University of Chicago Press, vol. 121(3), pages 437 - 492.
  18. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Is better rewarding experience the solution to Third World development?
    by Economic Logician in Economic Logic on 2013-05-03 14:23:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Francesco Caselli & Antonio Ciccone, 2013. "The contribution of schooling in development accounting: results from a nonparametric upper bound," LSE Research Online Documents on Economics 46783, London School of Economics and Political Science, LSE Library.
  2. Douglas Gollin & David Lagakos & Michael E. Waugh, 2013. "The Agricultural Productivity Gap," NBER Working Papers 19628, National Bureau of Economic Research, Inc.
  3. Theodore Koutmeridis, 2013. "The Market for "Rough Diamonds": Information, Finance and Wage Inequality," CDMA Working Paper Series 201307, Centre for Dynamic Macroeconomic Analysis, revised 14 Oct 2013.
  4. Kaarsen, Nicolai, 2014. "Cross-country differences in the quality of schooling," Journal of Development Economics, Elsevier, vol. 107(C), pages 215-224.
  5. Mike Waugh & David Lagakos & Doug Gollin, 2011. "The Agricultural Productivity Gap in Developing Countries," 2011 Meeting Papers 1397, Society for Economic Dynamics.
  6. Todd Schoellman, 2013. "Refugees and Early Childhood Human Capital," 2013 Meeting Papers 52, Society for Economic Dynamics.
  7. Vogel, Edgar & Ludwig, Alexander & Börsch-Supan, Axel, 2013. "Aging and Pension Reform: Extending the Retirement Age and Human Capital Formation," MEA discussion paper series 12257, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  8. Theodore Koutmeridis, 2013. "The Market for "Rough Diamonds": Information, Finance and Wage Inequality," Discussion Paper Series, Department of Economics 201307, Department of Economics, University of St. Andrews, revised 14 Oct 2013.
  9. Wenbiao Cai & Manish Pandey, 2013. "The Agricultural Productivity Gap in Europe," Departmental Working Papers 2013-05, The University of Winnipeg, Department of Economics.

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