This paper provides a theory that explains the cross-country distribution of average years of schooling, as well as the so called human capital premium puzzle. In our theory, credit frictions as well as differences in access to public education, fertility and mortality turn out to be the key reasons why schooling differs across countries. Differences in growth rates and in wages are second order.
I22: Educational Finance
J24: Human Capital; Skills; Occupational Choice; Labor Productivity
O11: Macroeconomic Analyses of Economic Development