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Experience Matters: Human Capital and Development Accounting

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

Using recently available large-sample micro data from 36 countries, we document that experience-earnings profiles are flatter in poor countries than in rich countries. Motivated by this fact, we conduct a development accounting exercise that allows the returns to experience to vary across countries but is otherwise standard. When the country-specific returns to experience are interpreted in such a development accounting framework -- and are therefore accounted for as part of human capital -- we find that human and physical capital differences can account for almost two thirds of the variation in cross-country income differences, as compared to less than half in previous studies.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9253.

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Date of creation: Dec 2012
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Handle: RePEc:cpr:ceprdp:9253
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