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On the Global Misallocation of Human Capital

Author

Listed:
  • Alexander Monge-Naranjo
  • Juan M. Sánchez
  • Raül Santaeulàlia-Llopis

Abstract

Is human capital allocated efficiently across countries? To answer this question, we need to differentiate misallocation from factor intensity differences. We use newly available estimates on natural resources shares from Monge-Naranjo et al. (2017) to correctly measure the factor shares of physical and human capital for a large number of countries and periods. We find that the global efficiency losses of the misallocation of human capital are around 60% of the world's output. Moreover, the misallocation of human capital seems to have worsened in the more recent years. Interestingly, we show that when physical and human capital can both be reallocated, physical capital would often ow from poor to rich countries, contrary to Lucas (1990)'s paradox.

Suggested Citation

  • Alexander Monge-Naranjo & Juan M. Sánchez & Raül Santaeulàlia-Llopis, 2018. "On the Global Misallocation of Human Capital," Working Papers 1037, Barcelona Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:1037
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    References listed on IDEAS

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    1. William Easterly, 2002. "The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262550423, September.
    2. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
    3. Lee E. Ohanian & Paulina Restrepo-Echavarria & Mark L. J. Wright, 2013. "Bad Investments and Missed Opportunities? Capital Flows to Asia and Latin America, 1950-2007," Working Papers 2014-38, Federal Reserve Bank of St. Louis.
    4. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-329, June.
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    More about this item

    Keywords

    natural rents; factor shares; misallocation; Migration; human capital;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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