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The World Technology Frontier

  • Francesco Caselli
  • Wilbur John Coleman II

We study cross-country differences in the aggregate production function when skilled and unskilled labor are imperfect substitutes. We find that there is a skill bias in cross-country technology differences. Higher-income countries use skilled labor more efficiently than lower-income countries, while they use unskilled labor relatively and, possibly, absolutely less efficiently. We also propose a simple explanation for our findings: rich countries, which are skilled-labor abundant, choose technologies that are best suited to skilled workers; poor countries, which are unskilled-labor abundant, choose technologies more appropriate to unskilled workers. We discuss alternative explanations, such as capital-skill complementarity and differences in schooling quality. (JEL E13, E23, J31, O14)

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 96 (2006)
Issue (Month): 3 (June)
Pages: 499-522

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Handle: RePEc:aea:aecrev:v:96:y:2006:i:3:p:499-522
Note: DOI: 10.1257/aer.96.3.499
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  16. Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997. "Capital-skill complementarity and inequality: a macroeconomic analysis," Staff Report 239, Federal Reserve Bank of Minneapolis.
  17. Daron Acemoglu, 2002. "Directed Technical Change," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 781-809.
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