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The Relative Efficiency of Skilled Labor across Countries: Measurement and Interpretation

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  • Federico Rossi

Abstract

I study how the relative efficiency of high- and low-skill labor varies across countries. Using microdata for countries at different stages of development, I document that differences in relative quantities and wages are consistent with high-skill workers being relatively more productive in rich countries. I exploit variation in the skill premia of foreign-educated migrants to discriminate between two possible drivers of this pattern: cross-country differences in the skill bias of technology and in the relative human capital of skilled labor. I find that the former is quantitatively more important, and discuss the implications of this result for development accounting.

Suggested Citation

  • Federico Rossi, 2022. "The Relative Efficiency of Skilled Labor across Countries: Measurement and Interpretation," American Economic Review, American Economic Association, vol. 112(1), pages 235-266, January.
    • Handle: RePEc:aea:aecrev:v:112:y:2022:i:1:p:235-66
    DOI: 10.1257/aer.20191852
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    References listed on IDEAS

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    1. Berthold Herrendorf & Christopher Herrington & Ákos Valentinyi, 2015. "Sectoral Technology and Structural Transformation," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(4), pages 104-133, October.
    2. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
    3. Robert C. Feenstra & Robert Inklaar & Marcel P. Timmer, 2015. "The Next Generation of the Penn World Table," American Economic Review, American Economic Association, vol. 105(10), pages 3150-3182, October.
    4. Mark Bils & Bariş Kaymak & Kai-Jie Wu, 2024. "Labor Substitutability among Schooling Groups," American Economic Journal: Macroeconomics, American Economic Association, vol. 16(4), pages 1-34, October.
    5. Daron Acemoglu, 2002. "Directed Technical Change," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 781-809.
    6. Hanushek, Eric A. & Schwerdt, Guido & Wiederhold, Simon & Woessmann, Ludger, 2015. "Returns to skills around the world: Evidence from PIAAC," European Economic Review, Elsevier, vol. 73(C), pages 103-130.
    7. Claudio E. Montenegro & Harry Anthony Patrinos, 2014. "Comparable Estimates of Returns to Schooling Around the World," Working Papers wp390, University of Chile, Department of Economics.
    8. Caselli, Francesco & Ciccone, Antonio, 2013. "The contribution of schooling in development accounting: Results from a nonparametric upper bound," Journal of Development Economics, Elsevier, vol. 104(C), pages 199-211.
    9. Francisco J. Buera & Joseph P. Kaboski, 2009. "Can Traditional Theories of Structural Change Fit The Data?," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 469-477, 04-05.
    10. World Bank, 2017. "World Development Indicators 2017," World Bank Publications - Books, The World Bank Group, number 26447.
    11. Benjamin F. Jones, 2014. "The Human Capital Stock: A Generalized Approach," American Economic Review, American Economic Association, vol. 104(11), pages 3752-3777, November.
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    Cited by:

    1. Mark Bils & Bariş Kaymak & Kai-Jie Wu, 2024. "Labor Substitutability among Schooling Groups," American Economic Journal: Macroeconomics, American Economic Association, vol. 16(4), pages 1-34, October.
    2. Werner Pena & Christian Siegel, 2023. "Routine-biased technical change, structure of employment, and cross-country income differences," Studies in Economics 2301, School of Economics, University of Kent.
    3. Feng, Qianbin & Hu, Xiao & Deng, Xinyi & Lu, Jun, 2023. "Anti-corruption campaign and capacity utilization of state-owned enterprises: Evidence from China’s central committee inspection," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 319-346.
    4. Paolo Martellini & Todd Schoellman & Jason Sockin, 2024. "The Global Distribution of College Graduate Quality," Journal of Political Economy, University of Chicago Press, vol. 132(2), pages 434-483.
    5. Leonard Kukić, 2021. "The Nature Of Technological Failure: Patterns Of Biased Technical Change In Socialist Europe," Journal of Economic Surveys, Wiley Blackwell, vol. 35(3), pages 895-925, July.

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    More about this item

    JEL classification:

    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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