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The Human Capital Stock: A Generalized Approach Comment


  • Francesco Caselli

    () (Centre for Macroeconomics (CFM)
    Centre For Economic Policy Research
    London School of Economics and Political Science (LSE))

  • Antonio Ciccone

    () (Barcelona Graduate School of Economics
    Centre For Economic Policy Research
    Mannheim University
    Universitat Pompeu Fabra)


Benjamin Jones (2014) revisits the measurement of human capital for the purposes of development accounting. “Traditional” (Jones’s terminology) accounting treats workers with different educational attainment as perfect substitutes. Jones considers development accounting when workers with different schooling are imperfect substitutes. His main result is that the perfect-substitute case provides a lower bound for the magnitude of human-capital differences across countries, and that, using plausible values for the elasticity of substitution between workers with different educational attainment, measured human capital variation can be boosted to the point that factors of production account for the totality of the variation in income across countries. This finding is in sharp contrast with the previous development accounting literature, which could only explain about half of the cross-country income variation with production factors, with the other half left to generic efficiency (technology) differences (Klenow and Rodriguez-Clare, 1997; Hall and Jones, 1999; Caselli, 2005). If differences in human capital could truly account for all the variation in income across countries, as Jones's calculations indicate, the implications would be far reaching. The academic and policy debate would have to shift away from its current focus on technology, legal and political institutions, and other features of the economic environment. Instead, the focus should be on the determinants of the skills embedded in workers. In this comment, we show that the amplification of cross-country human capital differences achieved by Jones, and hence his success at removing the unexplained component of income differences, is entirely due to an assumption that the relative wage of skilled workers is solely determined by attributes of workers (once the supply of skilled workers is accounted for). If, as we argue, skill premia are also influenced by technology, institutions, and other features of the economic environment, cross-country differences in human capital as measured by Jones will embed differences in these technological, institutional, and other attributes. As a result, Jones’s conclusion that human capital can account for all the variation in income across countries is unwarranted.

Suggested Citation

  • Francesco Caselli & Antonio Ciccone, 2017. "The Human Capital Stock: A Generalized Approach Comment," Discussion Papers 1733, Centre for Macroeconomics (CFM).
  • Handle: RePEc:cfm:wpaper:1733

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    References listed on IDEAS

    1. Lawrence F. Katz & Kevin M. Murphy, 1992. "Changes in Relative Wages, 1963–1987: Supply and Demand Factors," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 35-78.
    2. Lutz Hendricks, 2002. "How Important Is Human Capital for Development? Evidence from Immigrant Earnings," American Economic Review, American Economic Association, vol. 92(1), pages 198-219, March.
    3. Benjamin F. Jones, 2014. "The Human Capital Stock: A Generalized Approach," American Economic Review, American Economic Association, vol. 104(11), pages 3752-3777, November.
    4. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    5. Stephen Machin & John Van Reenen, 1998. "Technology and Changes in Skill Structure: Evidence from Seven OECD Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1215-1244.
    6. Caselli, Francesco & Ciccone, Antonio, 2013. "The contribution of schooling in development accounting: Results from a nonparametric upper bound," Journal of Development Economics, Elsevier, vol. 104(C), pages 199-211.
    7. Daron Acemoglu, 2003. "Patterns of Skill Premia," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 199-230.
    8. Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters,in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Sangmin Aum & Dongya Koh & Raül Santaeulàlia-Llopis, 2018. "Growth Facts with Intellectual Property Products: An Exploration of 31 OECD New National Accounts," Working Papers 1029, Barcelona Graduate School of Economics.

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