Abstract
We revisit the role of human capital and skill-biased technology in explaining the cross-country variation in GDP per worker. We propose a general-equilibrium accounting model in which workers of different human-capital groups (education and age) sort across broad occupational categories. The occupational assignment is determined by the comparative advantage of workers as well as productivity and distortion parameters that are specific to each human capital and occupation pair. We map the model to a harmonized micro dataset of 43 countries spanning the entire development spectrum that allows us to measure wages by human capital and occupation. The calibration reveals that cross-country productivity gaps are increasing in the complexity of the occupation. Also, conditional on occupation, the cross-country productivity gaps vary more strongly for low-skill than high-skill workers. The process of development is hence biased toward white-collar occupations but not biased toward higher-skilled workers. We then use the model to perform several counterfactuals. We find that the composition of human capital explains 14% of the non-agricultural GDP per worker gap between the richest and poorest countries. Occupational distortions are more pronounced in poor countries, but have a minor quantitative effect on aggregate output.
Local Organizer: Jérémy Boccanfuso