The world elasticity of labor substitution across education levels |
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Authors: | André Varella Mollick |
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Institution: | (1) The Vienna Institute for International Economic Studies (wiiw), Rahlgasse 3, 1060 Vienna, Austria |
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Abstract: | We estimate the world elasticity of substitution between labor types on a very well-known data set. Using enrollment ratios
and government expenditures on education as instruments, the plausible elasticities varying from 2.00 to 3.21 for the “college-completed”
definition suggests imperfect substitution between skilled and unskilled labor. Considerably higher values are found for the
“secondary” and “primary-completed” definitions. Overall, the higher the threshold for defining skilled labor, the lower the
elasticity and less likely is the switch between types of labor. These findings complement micro-evidence and support stronger
links between productivity and output for the “college educated” labor definition. |
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Keywords: | |
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