The Allocation of Talent and U.S. Economic Growth

Abstract

In 1960, 94 percent of doctors and lawyers were white men. By 2010, the fraction was just 62 percent. Similar changes in other highly‐skilled occupations have occurred throughout the U.S. economy during the last 50 years. Given that the innate talent for these professions is unlikely to have changed differently across groups, the change in the occupational distribution since 1960 suggests that a substantial pool of innately talented women and black men in 1960 were not pursuing their comparative advantage. We examine the effect on aggregate productivity of the convergence in the occupational distribution between 1960 and 2010 through the prism of a Roy model. Across our various specifications, between 20% and 40% of growth in aggregate market output per person can be explained by the improved allocation of talent.

Coase Lecture – The Glass Ceiling

“…Starting from the position that innate talent is equally distributed between men and women, it must be the case that superior economic outcomes would be achieved if women had the same odds as men to make it to the top of the earnings distribution. Hsieh et al (2016) perform an exercise to quantify how much economic growth is being 'left on the table' because of the underrepresentation of women and minorities in some occupations. They estimate that roughly one-quarter of growth in US GDP per person between 1960 and 2010 can be explained by declining barriers to the entry of white women, black men and black women in occupations where they were previously heavily underrepresented.…”

“…Hsieh et al . () perform an exercise to quantify how much economic growth is being ‘left on the table’ because of the underrepresentation of women and minorities in some occupations. They estimate that roughly one‐quarter of growth in US GDP per person between 1960 and 2010 can be explained by declining barriers to the entry of white women, black men and black women in occupations where they were previously heavily underrepresented.…”

Parenting With Style: Altruism and Paternalism in Intergenerational Preference Transmission

“…Next, we turn to changes that occurred during the last half century. Hsieh, Hurst, Jones, and Klenow (2013) documented that since the 1970s, U.S. society has become significantly more fluid: there is more occupational mobility, there are fewer gender-and racerelated barriers in the labor market, and the allocation of talent has improved. During the same period, wage dispersion across workers of a given education level started increasing.…”

Discrimination, human capital, and life expectancy in a model of economic development

“…Dollar and Gatti (1999) and Hausmann et al (2006) measure gender discrimination in a number of ways and report that its presence lowers per-capita GDP. Hsieh et al (2013) show that misallocation of talent due to occupational discrimination can have a significant impact on growth rates. A reallocation of talent toward comparative advantage is estimated to explain 17-20% of US growth between 1960 and 2008.…”