The Allocation of Talent and U.S. Economic Growth

52 Pages Posted: 20 Jun 2019

See all articles by Chang-Tai Hsieh

Chang-Tai Hsieh

University of Chicago - Booth School of Business; University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

Erik Hurst

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Charles I. Jones

Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Peter J. Klenow

Stanford University

Multiple version iconThere are 2 versions of this paper

Date Written: April 26, 2019

Abstract

In 1960, 94 percent of doctors and lawyers were white men. By 2010, the fraction was just 62 percent. Similar changes in other highly-skilled occupations have occurred throughout the U.S. economy during the last fifty years. Given that the innate talent for these professions is unlikely to have changed differently across groups, the change in the occupational distribution since 1960 suggests that a substantial pool of innately talented women and black men in 1960 were not pursuing their comparative advantage. We examine the effect on aggregate productivity of the convergence in the occupational distribution between 1960 and 2010 through the prism of a Roy model. Across our various specifications, between 20% and 40% of growth in aggregate market output per person can be explained by the improved allocation of talent.

Suggested Citation

Hsieh, Chang-Tai and Hurst, Erik and Jones, Charles I. and Klenow, Peter J., The Allocation of Talent and U.S. Economic Growth (April 26, 2019). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2019-93. Available at SSRN: https://ssrn.com/abstract=3406840 or http://dx.doi.org/10.2139/ssrn.3406840

Chang-Tai Hsieh

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
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University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
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National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Erik Hurst (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Charles I. Jones

Stanford Graduate School of Business ( email )

Stanford GSB
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Stanford, CA 94305-4800
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650-725-9265 (Phone)

HOME PAGE: http://www.stanford.edu/~chadj

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Peter J. Klenow

Stanford University ( email )

Stanford, CA 94305
United States

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