Econometrica: Sep 2019, Volume 87, Issue 5

The Allocation of Talent and U.S. Economic Growth

https://doi.org/10.3982/ECTA11427
p. 1439-1474

Chang‐Tai Hsieh, Erik Hurst, Charles I. Jones, Peter J. Klenow

In 1960, 94 percent of doctors and lawyers were white men. By 2010, the fraction was just 62 percent. Similar changes in other highly‐skilled occupations have occurred throughout the U.S. economy during the last 50 years. Given that the innate talent for these professions is unlikely to have changed differently across groups, the change in the occupational distribution since 1960 suggests that a substantial pool of innately talented women and black men in 1960 were not pursuing their comparative advantage. We examine the effect on aggregate productivity of the convergence in the occupational distribution between 1960 and 2010 through the prism of a Roy model. Across our various specifications, between 20% and 40% of growth in aggregate market output per person can be explained by the improved allocation of talent.



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Supplement to "The Allocation of Talent and U.S. Economic Growth"

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Supplement to "The Allocation of Talent and U.S. Economic Growth"

The propositions in the paper summarize the key results from the model. This appendix shows
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