| Abstract: | Accounting for the Stock of Human Capital: Selected Evidence and Potential Implications. — Given the observed distribution
of output and labor across countries, most capital flows should be from rich to poor countries. As is shown for a limited
sample of countries, accounting for differences in the stock of human capital substantially reduces the implicit cross-country
rate of return differentials. Additionally, accounting for human capital externalities based on independent empirical evidence,
turns around the predicted rate of return differentials in favor of rich countries. Hence, the world economy may converge
to a rather unequal distribution of incomes as long as human capital accumulation is neglected as the key variable limiting
economic development. |
