Since Griliches (1969), researchers have been intrigued by the idea that physical capital and skilled labor are relatively more complementary than physical capital and unskilled labor. This capital-skill complementarity hypothesis has received renewed attention recently, as researchers have suggested that this phenomenon might account for rising wage inequality between skilled and unskilled workers in several developed countries. In this paper we consider the cross-country evidence for capital-skill complementarity using a time-series, cross-section panel of 73 developed and less developed countries over a 25 year period. In particular, we focus on three empirical issues. First, what is the best specification of the aggregate production technology to address the capital-skill complementarity hypothesis. Second, how should we measure skilled labor? Finally, is there any cross-country evidence in support of the capital-skill complementarity hypothesis? Our main finding is that we are unable to reject the null hypothesis of no capital-skill complementarity using our panel data set.

Innovative activity, Patents and R&D, Individual effects, Count panel data methods, C20, O30,

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Natural resource abundance is a blessing for some countries, but a curse for others. We show that di¤erences across countries in the degree of …scal decentralization can contribute to this divergent outcome. Using a large panel of countries, covering several decades and various …scal decentralization and natural resource measures, we provide empirical support for the novel hypothesis. We also study a model that combines political and market mechanisms, under a uni…ed framework, to illustrate how natural resource booms may create negative e¤ects in …scally decentralized nations.