Skill Supply and the Organization of Production

Abstract:

The organization of production varies dramatically with economic development, with rich countries having less own-account workers and a larger wage employment share. We study the role of human capital in facilitating this transition. Using micro data from countries at different levels of development, we show that more educated workers and more recent cohorts are more likely to be in wage employment, and that cross-country gaps in educational attainment account for a large part of differences in the occupational structure. Exploiting variation in educational attainment across cohorts, we provide evidence for a causal relationship between schooling and occupational choices. A span of control model with skill heterogeneity provides a structural interpretation of these accounting results, which we use to revisit the role of human capital for development accounting