This paper revisits the question of how allowing for imperfect substitution among workers with different skill levels affects the results of development accounting. We consider a range of models that nest the approaches in the literature and calibrate them to a common set of moments, including particularly evidence on the wage gains of migrants. We obtain two main results. First, human capital accounts for between one-half and three-fourths of cross-country income gaps. Second, human capital accounts for only modest variation in the relative productivity of skilled versus unskilled labor.
Hendricks, Lutz, and Todd Schoellman.
"Skilled Labor Productivity and Cross-Country Income Differences."
American Economic Journal: Macroeconomics,
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Aggregate Factor Income Distribution
Time Allocation and Labor Supply
Human Capital; Skills; Occupational Choice; Labor Productivity
Wage Level and Structure; Wage Differentials
Geographic Labor Mobility; Immigrant Workers