David Lagakos, Benjamin Moll, Tommaso Porzio, Nancy Qian

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.

JEL Codes
E24: Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
J24: Human Capital; Skills; Occupational Choice; Labor Productivity
O11: Macroeconomic Analyses of Economic Development
human capital
experience-earnings profile
development accounting