Abstract
This paper investigates labor market outcomes and their effects on aggregate productivity in Brazil and India. The empirical evidence points to the inefficient allocation of talent across occupations in both countries. Two main factors are identified as causes of the inefficiency: frictions in human capital accumulation and frictions in the labor markets. The resulting distribution of talent negatively affects aggregate productivity, which is examined by using an augmented Roy model. The model predicts that the elimination of barriers to human capital accumulation and in the labor markets in Brazil and India increases the output on average by 22–52% and 38–53%, respectively.
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