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Experience Matters: Human Capital and Development Accounting

  • David Lagakos


    (Arizona State University)

  • Benjamin Moll


    (Princeton University)

  • Tommaso Porzio


    (Yale University)

  • Nancy Qian


    (Yale University, NBER, CEPR, BREAD)

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 Human Capital and Economic Opportunity Working Group in its series Working Papers with number 2012-021.

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Date of creation: Dec 2012
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Handle: RePEc:hka:wpaper:2012-021
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