Do Nations Combine O-Rings with Cobb-Douglas? Evidence from agriculture, equipment production, and the informal sector
The article focuses on the conditional relationship between various human capital proxies and the size of potential “O-Ring” or “Cobb-Douglas” sectors. We find that that years of schooling are a robust negative predictor of the size of the informal sector, conditioned on national average test scores, suggests that the signaling and acculturation mechanisms of schooling may help shift potentially productive workers into the formal economy.
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