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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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