DP9253 Experience Matters: Human Capital and Development Accounting
|Author(s):||David Lagakos, Benjamin Moll, Tommaso Porzio, Nancy Qian|
|Publication Date:||December 2012|
|Keyword(s):||Cross-country income, Development Accounting, Returns to Experience|
|Programme Areas:||International Macroeconomics, Labour Economics, Development Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=9253|
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.