Ilse Lindenlaub

“Meritocracy Across Countries”

During the May 2024 CORE Week, Ilse Lindenlaub presented her paper titled “Meritocracy Across Countries.” Division of labor and job specialization go hand in hand with economic development, as productivity gains accrue when individuals can use their skills in jobs that require them. Yale University economist Ilse Lindenlaub explored whether countries differ in their ability to match jobs to workers with the relevant skills, what she calls meritocracy in the labor market, and if those differences lead to variations in economic development. The presentation was based on “Meritocracy Across Countries,” a working paper co-authored by Lindenlaub, Oriana Bandiera and Ananya Kotia of the London School of Economics, and Christian Moser and Andrea Prat of Columbia University Business School.

Lindenlaub and her colleagues identify three fundamentals in each country’s labor market that connect worker-job matching and national income: (1) the endowments of multidimensional worker skills and job skill requirements, which determines match feasibility; (2) technology (such as machinery and equipment, as well as management practices and organization of labor), which determines the wage gains that come from successful matching; and (3) idiosyncratic matching frictions (e.g., social networks, family ties, wealth), which capture the role of nonproductive worker and job traits in the matching process. Using internationally comparable data on worker skills and job skill requirements for over 120,000 individuals across 28 countries, they find that higher income countries are better at matching workers to the jobs that require their skills. Further, they show that while frictions are important everywhere, differences in endowments and technology account for most of the variation in aggregate output across the countries in the sample.