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Talent, labor quality, and economic development

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

Abstract

We develop a theory of labor quality based on (i) the division of the labor force> between unskilled and skilled workers and (ii) investments in skilled workers. In our> theory, countries differ in two key dimensions: talent and total factor productivity> (TFP). We measure talent using the observed achievement levels from the Programme> for International Student Assessment (PISA) scores. Our findings imply that the qual-> ity of labor in rich countries is about twice as large as the quality in poor countries.> Thus, the implied disparities in TFP levels are smaller relative to the standard growth> model using a measure of labor quality based on Mincer returns. In our model, the> resulting elasticity of output per worker with respect to TFP is about 2.

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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2013-027.

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Date of creation: 2013
Handle: RePEc:fip:fedlwp:2013-027
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Keywords: Economic development ; Education - Economic aspects ; Labor productivity;

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Find related papers by JEL classification:
  • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
  • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
  • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

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  1. Eric Hanushek & Ludger Woessmann, 2012. "Do better schools lead to more growth? Cognitive skills, economic outcomes, and causation," Journal of Economic Growth, Springer, vol. 17(4), pages 267-321, December.
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  7. Todd Schoellman, 2012. "Education Quality and Development Accounting," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 388-417.
  8. James Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explanations With A Dynamic General Equilibrium Model of Labor Earnings With Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 1-58, January.
  9. Restuccia, Diego & Urrutia, Carlos, 2001. "Relative prices and investment rates," Journal of Monetary Economics, Elsevier, vol. 47(1), pages 93-121, February.
  10. Dhritman Bhattacharya & Nezih Guner & Gustavo Ventura, 2013. "Distortions, Endogenous Managerial Skills and Productivity Differences," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 11-25, January.
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  15. Eric A. Hanushek & Ludger Woessmann, 2008. "The Role of Cognitive Skills in Economic Development," Journal of Economic Literature, American Economic Association, vol. 46(3), pages 607-668, September.
  16. Córdoba, Juan Carlos & Ripoll, Marla, 2013. "What explains schooling differences across countries?," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 184-202.
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  18. 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.
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Cited by:

  1. Córdoba, Juan Carlos & Ripoll, Marla, 2013. "What explains schooling differences across countries?," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 184-202.
  2. Marika Santoro, 2015. "Long-term Gain, Short-Term Pain; Assessing the Potential Impact of Structural Reforms in Chile," IMF Working Papers 15/282, International Monetary Fund.
  3. Restuccia, Diego, 2014. "Barriers to capital accumulation in a model of technology adoption and schooling," Journal of Economic Dynamics and Control, Elsevier, vol. 44(C), pages 81-91.
  4. Dhritman Bhattacharya & Nezih Guner & Gustavo Ventura, 2013. "Distortions, Endogenous Managerial Skills and Productivity Differences," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 11-25, January.
  5. Yao, Yao, 2016. "Higher education expansion, economic reform and labor productivity," Working Paper Series 5357, Victoria University of Wellington, School of Economics and Finance.
  6. Francesc Obiols-Homs & Virginia Sánchez-Marcos, 2015. "Education Policy, Occupation-Mismatch and the Skill Premium," Working Papers 807, Barcelona Graduate School of Economics.
  7. Todd Schoellman & Lutz Hendricks, 2016. "Human Capital and Development Accounting: New Evidence from Wage Gains at Migration," 2016 Meeting Papers 159, Society for Economic Dynamics.
  8. Marti Mestieri & Johanna Schauer & Robert Townsend, 2017. "Human Capital Acquisition and Occupational Choice: Implications for Economic Development," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 151-186, April.
  9. International Monetary Fund, 2015. "Chile; Selected Issues," IMF Staff Country Reports 15/228, International Monetary Fund.

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