Business Intelligence

Heterogeneous Human Capital, Trade And Growth

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Executive Summary

Distribution differences in human capital matter for a country's growth and trade. While the existing literature considers only the diversity difference in talent distribution, the authors argue that the kurtosis difference is also an important factor. In a two-sector equilibrium growth model, where the production function is supermodular for the consumption-good sector and submodular for the R&D sector, they prove that the diversity effect and kurtosis effect are opposite to each other. A country endowed with more diverse but leptokurtic talent distribution may have lower growth rate and import submodular goods, opposite to the conventional result from considering only the diversity difference.

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