Discussion paper

DP9253 Experience Matters: Human Capital and Development Accounting

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.


Qian, N, D Lagakos, B Moll and T Porzio (2012), ‘DP9253 Experience Matters: Human Capital and Development Accounting‘, CEPR Discussion Paper No. 9253. CEPR Press, Paris & London. https://cepr.org/publications/dp9253