Talent Allocation and Post-Reform Growth in Central America
This paper examines the post-reform economic growth in three Central American economies -- Costa Rica, El Salvador, and Panama. From 1995 to 2015, each economy witnessed phenomenal shifts in labor market participation and occupational distribution...
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| Format: | Working Paper |
| Language: | English |
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World Bank, Washington, DC
2020
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| Online Access: | http://documents.worldbank.org/curated/en/249921599070476381/Talent-Allocation-and-Post-Reform-Growth-in-Central-America http://hdl.handle.net/10986/34427 |
| Summary: | This paper examines the post-reform
economic growth in three Central American economies -- Costa
Rica, El Salvador, and Panama. From 1995 to 2015, each
economy witnessed phenomenal shifts in labor market
participation and occupational distribution of women. If the
innate talent for a job did not change differently across
genders, the occupational changes suggest that many talented
women in the mid-1990s were in professions that did not
conform to their comparative advantage. The paper studies
the evolution of the occupational distribution using a model
of occupational choice in which three forces create
frictions to efficient allocation -- discrimination in labor
markets, obstacles to human capital accumulation, and
preferences (or social norms). The analysis shows that the
underlying improvement in talent allocation over the past
two decades had a quantitative impact on growth in Costa
Rica and Panama. Decomposing the aggregate effects reveals
that the gains were driven by declines in obstacles to human
capital accumulation. In contrast, shifts in labor market
discrimination created headwinds for expansion. The
aggregate effects in El Salvador are relatively mild and
noisy to the extent that the qualitative effect is difficult
to pin down. Nonetheless, the analysis finds that the
preference for market work has increased sharply in El
Salvador for both genders and has proved to be a drag on growth. |
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