Talent, Labor Quality, and Economic Development

FRB of St. Louis Working Paper No. 2013-027B

51 Pages Posted: 22 Sep 2013 Last revised: 26 Mar 2014

See all articles by German Cubas

German Cubas

University of Houston

B. Ravikumar

Federal Reserve Bank of Saint Louis

Gustavo Ventura

Arizona State University (ASU)

Date Written: January 1, 2014

Abstract

We develop a theory of labor quality based on (i) the division of the labor force between unskilled and skilled workers and (ii) investments in skilled workers. In our theory, countries differ in two key dimensions: talent and total factor productivity (TFP). We measure talent using the observed achievement levels from the Programme for International Student Assessment (PISA) scores. Our findings imply that the quality 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 growth model using a measure of labor quality based on Mincer returns. In our model, the resulting elasticity of output per worker with respect to TFP is about 2.

Keywords: Economic Development, TFP, PISA, Labor Quality

JEL Classification: O11, O40, E10

Suggested Citation

Cubas, German and Ravikumar, B. and Ventura, Gustavo, Talent, Labor Quality, and Economic Development (January 1, 2014). FRB of St. Louis Working Paper No. 2013-027B. Available at SSRN: https://ssrn.com/abstract=2328848 or http://dx.doi.org/10.2139/ssrn.2328848

German Cubas

University of Houston ( email )

Houston, TX 77204
United States

B. Ravikumar (Contact Author)

Federal Reserve Bank of Saint Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

Gustavo Ventura

Arizona State University (ASU) ( email )

Farmer Building 440G PO Box 872011
Tempe, AZ 85287
United States

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