Talent, labor quality, and economic development

German Cubas, B. Ravikumar, Gustavo Ventura

Research output: Contribution to journalArticlepeer-review

28 Scopus citations


We develop a theory of labor quality based on (i) the division of the labor force between unskilled and skilled workers and (ii) investments in skilled workers. In our theory, countries differ in two key dimensions: talent and total factor productivity (TFP). We measure talent using the observed achievement levels from the Programme for International Student Assessment (PISA) scores. Our findings imply that the quality of labor in rich countries is about twice as large as the quality in poor countries. Thus, the implied disparities in TFP levels are smaller relative to the standard growth model using a Mincerian measure of labor quality. In our model, the resulting elasticity of output per worker with respect to TFP is about 2.

Original languageEnglish (US)
Pages (from-to)160-181
Number of pages22
JournalReview of Economic Dynamics
StatePublished - Jul 2016


  • Economic development
  • Labor quality
  • PISA
  • TFP

ASJC Scopus subject areas

  • Economics and Econometrics


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