The World Technology Frontier

We study cross-country differences in the aggregate production function whenskilled and unskilled labor are imperfect substitutes. We find that there is a skill biasin cross-country technology differences. Higher-income countries use skilled labormore efficiently than lower-income countries, while they use unskilled labor relativelyand, possibly, absolutely less efficiently. We also propose a simple explanationfor our findings: rich countries, which are skilled-labor abundant, choosetechnologies that are best suited to skilled workers; poor countries, which areunskilled-labor abundant, choose technologies more appropriate to unskilled workers.We discuss alternative explanations, such as capital-skill complementarity anddifferences in schooling quality.[...]