Development accounting using PIAAC data

We carry out a classical development accounting exercise using data from the"Programme for the International Assessment of Adult Competencies" (PIAAC).PIACC data, available for 30 upper-middle and high-income countries and... [ view full abstract ]

We carry out a classical development accounting exercise using data from the

"Programme for the International Assessment of Adult Competencies" (PIAAC).
PIACC data, available for 30 upper-middle and high-income countries and nation-
ally representative for the working-age population, allow us to construct a multi-
dimensional measure for the stock of human capital in each country, taking into
account years of schooling, job experience, cognitive skills, on-the-job-training, and health. Individual level PIAAC data for the US are then used to estimate the
weight of each dimension in the human capital composite by running Mincerian
wage regressions. We find that differences in physical capital together with our
broad measure of human capital account for 41% of the variance in output per
worker, compared to only 27% when proxying human capital by average years of
schooling only. Differences in cognitive skills play the largest role while experience
and health are of lesser importance.