Mark Bils, University of Rochester

Labor Substitutability among Schooling Groups (joint w/Baris Kaymak and Kai-Jie Wu) No paper available.

Abstract: The degree of substitutability between schooling groups is essential to understanding the role of human capital in income differences and for assessing the economic impact of such policies as schooling subsidies, redistributive taxes, or selective immigration policies. We derive a lower bound on substitutability required for worldwide growth rates in real GDP to be consistent with the rapid worldwide growth in schooling since 1960 in conjunction with little or no decline in the wage premium to schooling.  That lower bound for the long-run elasticity of substitution is about 4, which is far higher than values commonly used in the literature. Given our bound, we examine the potential role of human capital in cross-country differences in income.