Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/278063 
Year of Publication: 
2023
Series/Report no.: 
GLO Discussion Paper No. 1331
Publisher: 
Global Labor Organization (GLO), Essen
Abstract: 
Misallocation of human capital across sectors can have substantial negative implications for aggregate output. So far, the literature examining this type of labor misallocation has assumed a Cobb-Douglas production function. Our paper departs from this assumption and instead considers more exible CES production functions with different labor skill types as individual inputs. Our estimates from sectoral data of 39 countries suggest that physical and human capital are less substitutable than Cobb-Douglas assumes. Our counterfactual results indicate that human capital misallocation can explain approximately 15% of output per worker variation across countries, which is substantially less than under a Cobb-Douglas specification (21%).
Subjects: 
Misallocation
Human Capital
Sector level
Production function
Elasticity of substitution
Total factor productivity
JEL: 
O41
O47
E24
Document Type: 
Working Paper

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