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Talent, Labor Quality and Economic Development

Listed author(s):
  • German Cubas
  • B Ravikumar
  • Gustavo Ventura

We develop a quantitative theory of labor quality based on the division of the labor force between unskilled and skilled workers, and investments in the quality of skilled labor. We use the theory to quantify the importance labor quality and Total Factor Productivity for cross-country income differences. A central ingredient in our analysis is the observed achievement levels (talent) constructed from PISA scores in a sample of 59 countries. Our findings imply that the cross-country differences in the quality of labor are almost twice as large as the conventional measures using Mincer returns. Thus, the implied disparities in TFP levels are smaller. The elasticity of output per worker with respect to TFP is about 2.3. We find no support for the hypothesis of skill-biased technology differences across countries.

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File URL: http://www.bcu.gub.uy/Estadisticas-e-Indicadores/Documentos%20de%20Trabajo/10.2012.pdf
File Function: First version, 2012
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Paper provided by Banco Central del Uruguay in its series Documentos de trabajo with number 2012010.

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Length: 37 pages
Date of creation: Jul 2012
Handle: RePEc:bku:doctra:2012010
Contact details of provider: Postal:
Biblioteca Especializada. Banco Central del Uruguay. Diagonal Fabini 777, Montevideo-Uruguay. CP 11100

Phone: +598 1967
Web page: http://www.bcu.gub.uy
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