Full Citation

Title: Cross-Country Income Differences: Technlogy Gaps or Human Capital Gaps? Evidence from Immigrant Earnings

Citation Type: Working Paper

Publication Year: 1999

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Abstract: This paper offers new evidence on the sources of cross-country income differences. It exploits the fact that competing theories differ sharply in their predictions for immigrant earnings. Neoclassical growth models with human capital imply that migrating from poor to rich countries leads to modest earnings gains because productivity is embodied in workers. In contrast, theories that attribute cross-country income differences to technology gaps predict much larger earnings gains because immigrants benefit from better technologies in rich host countries. The empirical evidence supports the prediction of large immigrant earnings gains. U.S. immigrants earn up to 12 times more than the neoclassical growth model predicts. By contrast, a simple model of country-specific technologies accounts for the broad features of immigrant earnings over time and across countries. This evidence is hard to reconcile with the view that differences in human and physical capital alone account for the bulk of the observed income dispersion across countries, but is consistent with Prescotts (1998) conclusion that accounting for cross-country income differentials requires a theory of total factor productivity.

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Authors: Hendricks, Lutz

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Publication Number: 99-4

Institution: Arizona State University

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Publisher Location: Arizona

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure, Migration and Immigration

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