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Cross-country Disparities in Skill Premium and Skill Acquisition

Banerjee, Anurag and Basu, Parantap and Keller, Elisa (2022) 'Cross-country Disparities in Skill Premium and Skill Acquisition.', Economic Inquiry .


Skilled individuals are rewarded more in poor than in rich countries. Why aren’t more individuals acquiring skills in poor countries? We document that the unemployment rate of the skilled net of that of the unskilled decreases with a country’s level of development. Using a matching model of occupational choice and skill acquisition, we quantify the role of barriers to enter entrepreneurship for these unemployment rates, skill premium and acquisition. The cross-country correlation between skill premium and acquisition decreases by 45% when each country’s gap to the US in the entrepreneurship barrier is decreased enough to even the unemployment differential.

Item Type:Article
Full text:Publisher-imposed embargo
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Available under License - Creative Commons Attribution Non-commercial 4.0.
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Publisher statement:© 2022 The Authors. Economic Inquiry published by Wiley Periodicals LLC on behalf of Western Economic Association International. This is an open access article under the terms of the Creative Commons Attribution-NonCommercial License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited and is not used for commercial purposes.
Date accepted:06 June 2022
Date deposited:08 June 2022
Date of first online publication:29 June 2022
Date first made open access:25 July 2022

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