The Effect of Labor Composition Index on Economic Development: Analysis of 18 countries for the period 1990-2010

Since workers are heterogeneous in terms of their skill levels and competences, the composition of labor force is important for the quantity and quality of human capital. This paper focuses on the importance of labor quality, as measured by the change in labor composition index, and its effects on economic development. The results show that labor composition has a positive significant effect on economic development for a panel of countries in the period 1990-2010. Furthermore, while quantity of education measures do not have any significant effect on development, the complementary effect of schooling (specifically secondary education) with labor composition index turn outs to be significant on development.