Talent, Labor Quality, and EconomicDevelopment
German Cubas, B. Ravikumar, and Gustavo Ventura
We develop a theory of labor quality based on (i) the division of the labor forcebetween unskilled and skilled workers and (ii) investments in skilled workers. In ourtheory, countries diﬀer in two key dimensions: talent and total factor productivity(TFP). We measure talent using the observed achievement levels from the Programmefor International Student Assessment (PISA) scores. Our ﬁndings imply that the qual-ity of labor in rich countries is about twice as large as the quality in poor countries.Thus, the implied disparities in TFP levels are smaller relative to the standard growthmodel using a measure of labor quality based on Mincer returns. In our model, theresulting elasticity of output per worker with respect to TFP is about 2.
Economic Development, TFP, PISA, Labor Quality.
O11, O40, E10.
University of Houston, Federal Reserve Bank of St. Louis, and Arizona State University, respectively.We thank Hector Chade, Juan Carlos Cordoba, Andr´es Erosa, Oksana Leukhina, Diego Restuccia, Andr´esRodriguez-Clare, and Todd Schoellman for their comments. We also thank the seminar participants at theCentral Bank of Uruguay, Concordia, Di Tella, Econometric Society Meeting (Asia), Economic DevelopmentConference at Toronto, FCS-Uruguay, Human Capital Conference (ASU), ITAM Summer Camp, LACEAMeetings, Macroeconomics Across Time and Space Conference, Research in Economic Dynamics Workshop(Barcelona), SED Meetings, Sabanci, Stony Brook, Texas A&M, UBC, Universidad de Montevideo, USC,and Yale. The usual disclaimer applies. The views expressed in this article are those of the authors and donot necessarily reﬂect the views of the Federal Reserve Bank of St. Louis or the Federal Reserve System.