This paper provides a theory that explains the cross-country distribution of average years of schooling, as well as the so called human capital premium puzzle. In our theory, credit frictions as well as differences in access to public education, fertility and mortality turn out to be the key...

We study the shape of the aggregate production function in the presence of land-intensive agriculture. The traditional Cobb-Douglas formulation is corrected to include a "diversification component." The implied TFP differences across countries are larger than what Solow residuals suggest.