How Important is Human Capital for Development? Evidence from Immigrant Earnings

Following Mankiw, Romer, and Weil (1992) a growing number of studies find that neoclassical growth models, augmented by human capital, successfully account for the large cross-country income differences found in the data. This paper argues that such models are inconsistent with observations on immigrant earnings. Their central prediction, that migration from poor to rich countries generates only small earnings gains, is strongly violated in the data. A standard growth model with country-specific technologies, in contrast, accounts well for immigrant earnings across countries and over time