Hostname: page-component-78c5997874-4rdpn Total loading time: 0 Render date: 2024-11-05T16:48:24.024Z Has data issue: false hasContentIssue false

TRADE IN HUMAN CAPITAL: A QUANTITATIVE THEORY OF ECONOMIC GROWTH AND THE IMPORT OF HIGHER EDUCATION

Published online by Cambridge University Press:  02 July 2020

Abdulaziz B. Shifa*
Affiliation:
Syracuse University
*
Address correspondence to: Abdulaziz B. Shifa, Economics Department, The Maxwell School, Syracuse University. e-mail: [email protected].

Abstract

For a developing economy transitioning into knowledge-intensive sectors, the lack of capacity for advanced education poses a natural challenge. Many successfully industrialized countries used high-skilled foreign teachers to overcome this challenge. I present a stylized quantitative model of trade in high-skilled human capital, in which colleges in a developing country can hire high quality teachers from a developed country. In the model, the use of foreign teachers is proposed as a possible mechanism to build domestic capacity for advanced education. Quantitative calibrations of the model show two main results. First, there are significant frictions in human capital trade, as measured by the wedge between the level of human capital observed in the data versus the level simulated under the assumption of no frictions. Removal of the wedge can narrow the average income gap between the USA and other countries by about 14–24%. Second, relative to countries with the lowest and highest incomes, middle-income countries appear to gain the most from removing the wedge.

Type
Articles
Copyright
© Cambridge University Press 2020

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

I thank Philippe Aghion, Kristy Buzard, Alexandre Dmitriev, John Hassler, Boyan Jovanovic, Paul Klein, Per Krusell, Conny Olovsson, Torsten Persson, Kjetil Storesletten, Jakob Svensson, and participants in the macro study group at the Institute for International Economic Studies (IIES), the Development Workshop group at Gothenburg University, and the SUDWEc 2012 conference for helpful feedback. I thank anonymous referees for helpful comments. All errors are mine.

References

Acemoglu, D. (2002) Directed technical change. Review of Economic Studies 69(4), 781809.CrossRefGoogle Scholar
Acemoglu, D. and Angrist, J. (2000) How large are human-capital externalities? Evidence from compulsory schooling laws. In: NBER Macroeconomics Annual, vol. 15, pp. 959.CrossRefGoogle Scholar
Acemoglu, D. and Autor, D. (2012) What does human capital do? A review of Goldin and Katz’s the race between education and technology. Journal of Economic Literature 50(2), 426–63.CrossRefGoogle Scholar
Acemoglu, D. and Zilibotti, F. (1997). Was prometheus unbound by chance? Risk, diversification, and growth. Journal of Political Economy 105(4), 709751.CrossRefGoogle Scholar
Azariadis, C. and Kaas, L. (2016) Capital misallocation and aggregate factor productivity. Macroeconomic Dynamics 20(2), 525543.CrossRefGoogle Scholar
Banerjee, A. V. and Duflo, E. (2005) Growth theory through the lens of development economics. In: Aghion, P. and Durlauf, S. (eds.), Handbook of Economic Growth, Volume 1 of Handbook of Economic Growth, Chapter 7, pp. 473552. Elsevier.CrossRefGoogle Scholar
Barro, R. J. and Lee, J. W. (2013) A new data set of educational attainment in the world, 1950–2010. Journal of Development Economics 104, 184198.CrossRefGoogle Scholar
Beine, M., Docquier, F. and Rapoport, H. (2008) Brain drain and human capital formation in developing countries: Winners and losers. The Economic Journal 118(528), 631652.CrossRefGoogle Scholar
Ben-Porath, Y. (1967) The production of human capital and the life cycle of earnings. Journal of Political Economy 75, 352.CrossRefGoogle Scholar
Besley, T. and Persson, T. (2011) Pillars of Prosperity: The Political Economics of Development Clusters. Princeton, NJ: Princeton University Press.Google Scholar
Bils, M. and Klenow, P. J. (2000) Does schooling cause growth? American Economic Review 90(5), 11601183.CrossRefGoogle Scholar
Caselli, F. (2017). Technology Differences over Space and Time. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Caselli, F. and Ciccone, A. (2019) The human capital stock: A generalized approach: Comment. American Economic Review 109(3), 1155–74.CrossRefGoogle Scholar
Caselli, F. and Feyrer, J. (2007) The marginal product of capital. The Quarterly Journal of Economics 122(2), 535568.CrossRefGoogle Scholar
Ciccone, A. and Peri, G. (2005) Long-run substitutability between more and less educated workers: Evidence from U.S. states, 1950-1990. Review of Economics and Statistics 87(4), 652663.CrossRefGoogle Scholar
Erosa, A., Koreshkova, T. and Restuccia, D. (2010) How important is human capital? A quantitative theory assessment of world income inequality. The Review of Economic Studies 77(4), 14211449.CrossRefGoogle Scholar
Feenstra, R., Inklaar, R. and Timmer, M. P. (2015) The next generation of the Penn World Table. American Economic Review 105(10), 31503182.CrossRefGoogle Scholar
Gourinchas, P.-O. and Jeanne, O. (2006) The elusive gains from international financial integration. Review of Economic Studies 73(3), 715741.CrossRefGoogle Scholar
Growiec, J. (2010) Human capital, aggregation, and growth. Macroeconomic Dynamics 14(2), 189211.CrossRefGoogle Scholar
Hassler, J., Krusell, P., Shifa, A. B. and Spiro, D. (2017) Should developing countries constrain resource-income spending? A quantitative analysis of oil income in Uganda. The Energy Journal 38, 103131.CrossRefGoogle Scholar
Hendricks, L. and Schoellman, T. (2018) Human capital and development accounting: New evidence from wage gains at migration. Quarterly Journal of Economics 133(2), 665700.CrossRefGoogle Scholar
Hsieh, H. S. (1989) University education and research in Taiwan. In: Altbach, P. G. (ed.), Scientific Development and Higher Education. The Case of Newly Industrializing Nations, pp. 177214. New York: Praeger Publishers.Google Scholar
Jones, B. F. (2008) The Knowledge Trap: Human Capital and Development Reconsidered. Working Paper: No. 14138, National Bureau of Economic Research.CrossRefGoogle Scholar
Jones, B. F. (2014). The human capital stock: A generalized approach. American Economic Review 104(11), 37523777.CrossRefGoogle Scholar
Kalemli-Ozcan, S., Reshef, A., Sörensen, B. and Yosha, O. (2010). Why does capital flow to rich states? Review of Economics and Statistics 92(4), 769783.CrossRefGoogle Scholar
Katz, L. F. and Murphy, K. M. (1992) Changes in relative wages, 1963-1987: Supply and demand factors. Quarterly Journal of Economics 107(1), 3578.CrossRefGoogle Scholar
Lucas, R. E., Jr. (1990) Why doesn’t capital flow from rich to poor countries? American Economic Review 80(2), 9296.Google Scholar
Manuelli, R. E. and Seshadri, A. (2014). Human capital and the wealth of nations. American Economic Review 104(9), 27362762.CrossRefGoogle Scholar
Mazzoleni, R. (2008) Catching up and academic institutions: A comparative study of past national experiences. Journal of Development Studies 44(5), 678700.CrossRefGoogle Scholar
Montenegro, C. and Patrinos, H. (2014) Comparable Estimates of Returns to Schooling Around the World. Policy Research Working Paper: No. 7020, World Bank.CrossRefGoogle Scholar
Nakayama, S. (1989). Independence and choice: Western impacts on Japanese higher education. Higher Education 18(1), 3148.CrossRefGoogle Scholar
Nelson, R. R. and Phelps, E. S. (1966) Investment in humans, technological diffusion, and economic growth. The American Economic Review 56(1/2), 6975.Google Scholar
Obstfeld, M. (1994) Risk-taking, global diversification, and growth. The American Economic Review 84(5), 13101329.Google Scholar
Okoye, D. (2016) Appropriate technology and income differences. International Economic Review 57(3), 955996.CrossRefGoogle Scholar
Oreopoulos, P. and Petronijevic, U. (2013) Making college worth it: A review of the returns to higher education. The Future of Children 23(1), 4165.CrossRefGoogle ScholarPubMed
Rossi, F. (2017) The relative efficiency of skilled labor across countries: Measurement and interpretation. memo, University of Warwick.Google Scholar
Tamura, R. (2001) Teachers, growth, and convergence. Journal of Political Economy 109(5), 10211059.CrossRefGoogle Scholar
News, U.S. (2011) Liberal Arts Colleges With Lowest Student-Faculty Ratios. U.S. News.Google Scholar
Wu, W.-H., Chen, S.-F. and Wu, C.-T. (1989) The development of higher education in Taiwan. Higher Education 18(1), 117136.CrossRefGoogle Scholar