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Talent, labor quality, and economic development

  • German Cubas
  • B. Ravikumar
  • Gustavo Ventura

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
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Handle: RePEc:fip:fedlwp:2013-027
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  10. Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
  11. Raquel Fernandez & Nezih Guner & John Knowles, 2001. "Love and Money: A Theoretical and Empirical Analysis of Household Sorting and Inequality," NBER Working Papers 8580, National Bureau of Economic Research, Inc.
  12. Prescott, Edward C, 1998. "Needed: A Theory of Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-51, August.
  13. 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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