Institute Working Paper 1

Human Capital and Development Accounting: New Evidence from Wage Gains at Migration

Lutz Hendricks | University of North Carolina, Chapel Hill
Todd Schoellman | Visiting Scholar, Opportunity & Inclusive Growth Institute

Published August 10, 2017

We use new data on the pre- and post-migration wages of U.S. immigrants to measure the importance of human capital for development accounting. Wages increase at migration, but by less than half of the gap in GDP per worker. This finding implies that human capital accounts for a large share of cross-country income differences. Wage gains decline with education, consistent with imperfect substitution between skill types. We bound the human capital share in development accounting to between one-half and two-thirds; additional assumptions lead to an estimate of 60 percent. We also provide results on the importance of assimilation and skill transfer.


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