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Discussion Paper Details

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Title: Experience Matters: Human Capital and Development Accounting

Author(s): David Lagakos, Benjamin Moll, Tommaso Porzio and Nancy Qian

Publication Date: December 2012

Keyword(s): Cross-country income, Development Accounting and Returns to Experience

Programme Area(s): Development Economics, International Macroeconomics and Labour Economics

Abstract: Using recently available large-sample micro data from 36 countries, we document that experience-earnings profiles are flatter in poor countries than in rich countries. Motivated by this fact, we conduct a development accounting exercise that allows the returns to experience to vary across countries but is otherwise standard. When the country-specific returns to experience are interpreted in such a development accounting framework -- and are therefore accounted for as part of human capital -- we find that human and physical capital differences can account for almost two thirds of the variation in cross-country income differences, as compared to less than half in previous studies.

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Bibliographic Reference

Lagakos, D, Moll, B, Porzio, T and Qian, N. 2012. 'Experience Matters: Human Capital and Development Accounting'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9253