Misallocation of talent, human capital formation, and development in Brazil
Misallocation of talent, human capital formation, and development in Brazil
We study talent allocation in an economy where teachers play a crucial role in forming the workforce’s human capital. We define a Roy model with an externality in the occupational choice because teachers’ quantity and quality are essential to workers’ human capital. Then, when individuals with more abilities choose to become teachers, all workforce benefits. However, in our model, individuals’ occupational decisions are distorted by frictions in the labor and educational goods markets, which may cause a misallocation of talent and harm economic growth and development. After calibrating the model to the Brazilian economy, we find that removing the friction in the labor market increase the Brazilian income by 16.94%. Also, if we assume that the barriers to becoming a teacher across the Brazilian regions are equal to the state with the highest average teachers’ human capital, GDP would increase by 87.85% due to externalities of the teacher’s occupation. Keywords: Misallocation; Frictions; Human Capital; Externalities; Development;