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Labor Substitutability among Schooling Groups

Author

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  • Mark Bils
  • Bariş Kaymak
  • Kai-Jie Wu
Abstract
Given worldwide trends in education, wage premium for schooling, and real GDP, we derive a lower bound for the long-run elasticity of labor substitution across schooling groups of around 4, which is far higher than values commonly used in the literature. We exploit our bound to reexamine the importance of human capital in cross-country income differences, including the roles of school quality versus the skill bias of technology in the greater efficiency gains from schooling in richer countries.

Suggested Citation

  • Mark Bils & Bariş Kaymak & Kai-Jie Wu, 2024. "Labor Substitutability among Schooling Groups," American Economic Journal: Macroeconomics, American Economic Association, vol. 16(4), pages 1-34, October.
    • Handle: RePEc:aea:aejmac:v:16:y:2024:i:4:p:1-34
    DOI: 10.1257/mac.20220288
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    Cited by:

    1. Jeremy Greenwood & Nezih Guner & Ricardo Marto, 2021. "The Great Transition: Kuznets Facts for Family-Economists," Economie d'Avant Garde Research Reports 33, Economie d'Avant Garde.
    2. Federico Rossi, 2022. "The Relative Efficiency of Skilled Labor across Countries: Measurement and Interpretation," American Economic Review, American Economic Association, vol. 112(1), pages 235-266, January.
    3. Kirill Borissov & Aleksey Minabutdinov & Roman Popov, 2024. "Ability Distribution and Dynamics of Wage Inequality: Unintended Consequences of Human Capital Accumulation," CER-ETH Economics working paper series 24/393, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.

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    More about this item

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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