Working Paper: NBER ID: w29895
Authors: Mark Bils; Bari Kaymak; Kaijie Wu
Abstract: Knowing the degree of substitutability between schooling groups is essential to understanding the role of human capital in income differences and to assessing the economic impact of such policies as schooling subsidies, immigration systems, or redistributive taxes. We derive a lower bound for the substitutability required for worldwide growth in real GDP from 1960 to 2010 to be consistent with a stable wage premium for schooling despite the rapid growth in schooling, assuming no exogenous worldwide regress in the technology frontier for workers with only primary schooling. That lower bound for the long-run elasticity of substitution is about 4, which is far higher than values commonly used in the literature. Given our bound, we reexamine the importance of human capital in cross-country income differences and the roles of school quality versus the skill bias of technology in greater efficiency gains from schooling in richer countries.
Keywords: No keywords provided
JEL Codes: E24; J24; O15; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| labor substitutability (J49) | economic outcomes (F61) |
| changes in schooling levels (I21) | economic productivity (O49) |
| long-run elasticity of substitution between schooling groups (J24) | stable returns to schooling (I21) |
| lower elasticities (H30) | substantial technological regress for workers with lower schooling levels (J24) |