All of Scioteca
Communities & Collections By Issue Date Authors Titles Subjects Country / Region
Profiles
Our Authors
My Account
Login

Human Capital and Financial Development: Firm-Level Interactions and Macroeconomic Implications

Capital-skill complementarity in production implies non-trivial interactions between availability of human capital and financial constraints. Firms that are constrained in their access to finance hire a lower proportion of skilled workers than unconstrained firms. On the other hand, higher wages of skilled workers reduce firms’ desired capital intensity and thus loosen their effective financial constraints. We build a dynamic occupational choice model to quantify how a lack of human capital and financial frictions, as well as the joint effect of both restrictions interact to explain cross-country differences in aggregate output per capita, productivity, average firm size and college premia. We calibrate our model to US data, and we vary financial frictions and educational attainment as observed across countries. We find that the joint effect of both restrictions is up to 50 percent larger compared to the sum of the individual effects. In countries with a negligible share of tertiary educated workers, financial development has small effects on aggregate output.

Abstract

Description

Subject

Banca de desarrollo | Educación | Evaluación de impacto | Finanzas

País / Región

América del norte
América Latina y el Caribe
Estados Unidos

URI

https://scioteca.caf.com/handle/123456789/1515

Date

2019-12-04

Cite from this publication

Collections

6.1 Documentos de trabajo en investigación socioeconómica

Endorsement

Review

Supplemented By

Referenced By

Thumbnail Image

Files

Human-Capital-and-Financial-Development-Firm-Level-Interactions-and-Macroeconomic-Implications.pdf (1.29 MB)

Authors

Journal Title

Journal ISSN

Volume Title

Publisher

CAF

Related Items

Thumbnail Image
Financial Frictions, Trade, and Misallocation

We investigate the extent to which financial frictions shape the aggregate effects of a trade liberalization through their impact on aggregate total factor productivity (TFP)...

Thumbnail Image
Financial Technologies, Labor Markets, and Informality: Evidence from Instant Payment Systems

While technological innovations typically increase wage inequality by favoring skilled workers, we show that instant payment systems instead reduce it. We study the labor market...

Thumbnail Image
Capital Controls and Firm Performance: The Effects of the Chilean Encaje

This paper studies the effects of the capital controls imposed by Chile between 1991 and 1998, i.e. the Chilean encaje, on firms' production, investment and...

Thumbnail Image
The impact of the minimum wage on the destruction and creation of products

We study the impact of changes in the legal minimum wage on the creation and destruction of products at the firm level. This can be...

Thumbnail Image
Digitalization and artificial intelligence in Latin America: employer demand for AI, technical and soft skills

The rapid diffusion of automation and the application of artificial intelligence (AI) to production have boosted productivity and economic growth while also posing significant challenges...

Thumbnail Image
Financial Frictions, Occupational Choice and Economic Inequality

We develop a quantitative theory of entrepreneurship, income inequality, and financial frictions disciplined with household data from Brazil. The theory extends Lucas (1978) by modeling...