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

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. (JEL I26, J24, J31, J61, L16, O15)

Download Full-text

Measuring Total Factor Productivity: Accounting for cross country differences in income per capita // Мјерење укупне факторске продуктивности: обрачун међудржавних разлика у БДП-у по раднику

ACTA ECONOMICA ◽

10.7251/ace1319075p ◽

2011 ◽

Vol 11 (19) ◽

pp. 75

Author(s):

Stevo Pucar ◽

Zoran Borovic

Keyword(s):

Total Factor Productivity ◽

Factor Productivity ◽

Productivity Measurement ◽

Production Factors ◽

First Pass ◽

Development Accounting ◽

Proximate Determinants ◽

Country Differences ◽

Cross Country ◽

The Cross

Summary: Why are some countries so much richer than others? Why do some countries produce so much more output per worker than others? Influential works by Klenow & Rodriguez-Clare (1997), Hall and Jones (1999), and Parente & Prescott (2000), among others, have argued that most of the cross country differences in output per worker is explained by differences in total factor productivity. Total factor productivity measurement enables researchers to determine the contribution of supply-side production factors to economic growth. Development Accounting is a first-pass attempt at organizing the answer around two proximate determinants: factors of production and efficiency. It answers the question “how much of the cross-country income variance can be attributed to differences in (physical and human) capital, and how much to differences in the efficiency with which capital is used’’?In this article, we will outline framework for growth accounting to account for cross-country difference in income of Republic of Srpska, Republic of Croatia and Republic of Serbia. The current consensus is that differences in income per worker across countries do not arise primarly from differences in quantities in capital or labour, but rather from differences in efficiency with which are these factors used. We find that total factor productivity is very important for the growth of output per worker, but only in cases of Serbia and Croatia. In case of Srpska the most important factor for the growth of output per worker is growth of capital.Резиме: Зашто су неке земље толико богатије од других? Зашто неке земље остварују много већи обим производње по раднику од других? Утицајни радови Klenow и Rodriguez-Clare (1997), Hall и Jones (1999), и Parente и Prescott (2000), између осталих, тврдили су да је највећи број међудржавних разлика у обиму производње по раднику резултат разлика у Укупној Факторској Продуктивности. Мјерење Укупне Факторске Продуктивности омогућава истраживачима да утврде допринос фактора на страни понуде привредном расту. Развој ‘’рачуноводства раста’’ представља први покушаја анализирања двије сродне детерминанте раста: фактори производње и ефикасности. Ова анализа даје одговор на питање “колико су међудржавне разлике у оствареном БДП-у резултат међудржавних разлика у (физичком и људском) капиталу, а колико су резултат разлика у ефикасности којом се капитал користи’’?У овом раду ћемо приказати оквир за “рачуноводство раста’’ који ће се примјенити за обрачун међудржавних разлика у БДП-у по раднику за Републику Српску, Републику Хрватску и Републику Србију. Тренутни консензус међу ауторима је да разлике у БДП-у по раднику између земаља не настају првенствено због разлика у количинама капитала или рада, него због разлика у ефикасности са којом се ови фактори користе. Анализом смо дошли до закључка да је Укупна Факторска Продуктивност веома важна за раст производње по раднику, али само у случајевима Србије и Хрватске. У случају Српске најважнији фактор за раст производње по раднику је раст техничко-технолошке опремљености рада капиталом.

Download Full-text

The World Technology Frontier

The American Economic Review ◽

10.1257/aer.96.3.499 ◽

2006 ◽

Vol 96 (3) ◽

pp. 499-522 ◽

Cited By ~ 272

Author(s):

Francesco Caselli ◽

Wilbur John Coleman

Keyword(s):

Skilled Labor ◽

Simple Explanation ◽

Unskilled Labor ◽

Skilled Workers ◽

Poor Countries ◽

Aggregate Production Function ◽

Unskilled Workers ◽

Cross Country ◽

Rich Countries ◽

Lower Income Countries

We study cross-country differences in the aggregate production function when skilled and unskilled labor are imperfect substitutes. We find that there is a skill bias in cross-country technology differences. Higher-income countries use skilled labor more efficiently than lower-income countries, while they use unskilled labor relatively and, possibly, absolutely less efficiently. We also propose a simple explanation for our findings: rich countries, which are skilled-labor abundant, choose technologies that are best suited to skilled workers; poor countries, which are unskilled-labor abundant, choose technologies more appropriate to unskilled workers. We discuss alternative explanations, such as capital-skill complementarity and differences in schooling quality.

Download Full-text

Human Capital and the Wealth of Nations

The American Economic Review ◽

10.1257/aer.104.9.2736 ◽

2014 ◽

Vol 104 (9) ◽

pp. 2736-2762 ◽

Cited By ~ 109

Author(s):

Rodolfo E. Manuelli ◽

Ananth Seshadri

Keyword(s):

Human Capital ◽

Demographic Variables ◽

Factor Productivity ◽

Rates Of Return ◽

Capital Theory ◽

Country Differences ◽

Cross Country ◽

Wealth Of Nations

We reevaluate the role of human capital in determining the wealth of nations. We use standard human capital theory to estimate stocks of human capital and allow the quality of human capital to vary across countries. Our model can explain differences in schooling and earnings profiles and, consequently, estimates of Mincerian rates of return across countries. We find that effective human capital per worker varies substantially across countries. Cross-country differences in Total Factor Productivity (TFP) are significantly smaller than found in previous studies. Our model implies that output per worker is highly responsive to changes in TFP and demographic variables. (JEL E23, I25, J24, J31, O47)

Download Full-text

Inventory Management, Product Quality, and Cross‑Country Income Differences

American Economic Journal Macroeconomics ◽

10.1257/mac.20170080 ◽

2019 ◽

Vol 11 (1) ◽

pp. 338-388 ◽

Cited By ~ 2

Author(s):

Bernardo S. Blum ◽

Sebastian Claro ◽

Kunal Dasgupta ◽

Ignatius J. Horstmann

Keyword(s):

Product Quality ◽

Inventory Management ◽

Reduced Form ◽

Poor Countries ◽

Quality Upgrading ◽

Country Differences ◽

Cross Country ◽

Export Destination ◽

The One ◽

Rich Countries

Previous research has documented that export shipments are “lumpy”— exporters make infrequent and relatively large shipments to any given export destination. This fact has been interpreted as implying that fixed, per shipment cost and inventory management decisions play a key role in international trade. We document here that exports from poor countries are considerably more lumpy—have higher fixed per shipment cost— than those from rich countries. Using a model of trade with inventory management, we estimate that the country at the ninetieth percentile of the distribution of per shipment costs has almost three times higher costs than the one at the tenth percentile. We show that these per shipment cost differences have a reduced-form representation given by an ad valorem trade cost that varies with export country income (as in Waugh 2010 ). A calibrated version of the model that incorporates these estimates and allows for endogenous product quality reveals that cross-country differences in per shipment costs explain almost 40 percent of the observed cross-country differences in income. It also shows that policies that lower per shipment costs can lead to significant welfare gains, mainly due to induced quality upgrading. (JEL F12, F14, F43, G31, O16, O19)

Download Full-text

Human Capital and Macroeconomic Development: A Review of the Evidence

The World Bank Research Observer ◽

10.1093/wbro/lkaa002 ◽

2020 ◽

Vol 35 (2) ◽

pp. 227-262

Author(s):

Federico Rossi

Keyword(s):

Human Capital ◽

New Technologies ◽

Policy Implications ◽

Policy Debates ◽

Development Accounting ◽

Aggregate Production Function ◽

Cross Country ◽

Complementary Inputs ◽

Future Work

Abstract The role of human capital in facilitating macroeconomic development is at the center of both academic and policy debates. Through the lens of a simple aggregate production function, human capital might increase output per capita by directly entering in the production process, incentivizing the accumulation of complementary inputs, and facilitating the adoption of new technologies. This paper discusses the advantages and limitations of three approaches that have been used to evaluate the empirical importance of these channels: cross-country regressions, development accounting, and quantitative models. The key findings in the literature are reviewed and some of them are replicated using updated data. The bulk of the evidence suggests that human capital is an important determinant of cross-country income gaps, especially when its measurement is broadened to go beyond simple proxies of educational attainment. The paper concludes by highlighting policy implications and promising avenues for future work.

Download Full-text

Capital Obsolescence and Agricultural Productivity*

The Quarterly Journal of Economics ◽

10.1093/qje/qjaa028 ◽

2020 ◽

Vol 136 (1) ◽

pp. 505-561

Author(s):

Julieta Caunedo ◽

Elisa Keller

Keyword(s):

Labor Productivity ◽

Productivity Growth ◽

Agricultural Labor ◽

Data Set ◽

Agricultural Labor Productivity ◽

Country Differences ◽

Cross Country ◽

Rich Countries ◽

Price Differences ◽

Do So

Abstract This article argues that accounting for capital-embodied technology greatly increases the importance of capital in explaining cross-country differences in agricultural labor productivity. To do so, we draw on a novel data set of agricultural capital prices. We document that new capital is more expensive in richer countries, both in absolute terms and relative to old capital. A model of endogenous adoption of capital of different quality links these price differences to the path of capital-embodied technology. In particular, our model recovers the level of embodied technology from the price of new capital and the growth rate of embodied technology from the price of new capital relative to old capital. We then measure the stocks of quality-adjusted capital in agriculture for a sample of 16 countries at different stages of development. We find that adjusting for differences in quality almost doubles the importance of capital in accounting for cross-country differences in agricultural labor productivity: from 21% to 37%. In addition, improvements in capital quality have been an important source of agricultural labor productivity growth over the past 25 years, accounting for 21% and 35% of the productivity growth in poor and rich countries, respectively.

Download Full-text

The Quality of Education, Educational Institutions, and Cross-Country Differences in Human Capital Accumulation

Growth and Change ◽

10.1111/j.1468-2257.2005.00281.x ◽

2005 ◽

Vol 36 (3) ◽

pp. 354-373 ◽

Cited By ~ 3

Author(s):

SHAWN D. KNABB ◽

CHRISTIANA STODDARD

Keyword(s):

Human Capital ◽

Capital Accumulation ◽

Educational Institutions ◽

Quality Of Education ◽

Human Capital Accumulation ◽

Country Differences ◽

Cross Country

Download Full-text

The Lack of Convergence of Latin-America Compared with CESEE

IMF Working Papers ◽

10.5089/9781513547886.001 ◽

2020 ◽

Vol 20 (98) ◽

Author(s):

Bas Bakker ◽

Manuk Ghazanchyan ◽

Alex Ho ◽

Vibha Nanda

Keyword(s):

Human Capital ◽

Latin America ◽

The United States ◽

Business Climate ◽

Income Levels ◽

Poor Countries ◽

Climate Indicators ◽

Output Ratio ◽

Country Differences ◽

Cross Country

In the last few decades there has been little convergence of income levels in Latin America with those in the United States, in sharp contrast with both emerging Asia and emerging Europe. This paper argues that lack of convergence was not the result of low investment. Latin America is poorer because of lower human capital levels and lower TFP—not because of a lower capital-output ratio. Cross-country differences of TFP in turn are associated with differences in human capital, governance and business climate indicators. We demonstrate that once levels of human capital and governance are taken into account, there is strong conditional cross-country convergence. Poor countries with high levels of human capital, governance or business climate indicators converge rapidly. Poor countries without those attributes do not. We show that low investment is the result of low TFP and thus GDP growth—not the cause.

Download Full-text