Life-Cycle Human Capital Accumulation Across Countries: Lessons From U.S. Immigrants

How much does life-cycle human capital accumulation vary across countries? This paper seeks to answer this question by studying U.S. immigrants, who come from a wide variety of countries but work in a common labor market. We document that returns to potential experience among U.S. immigrants are higher on average for workers coming from rich countries than for those coming from poor countries. To understand this fact we build a model of life-cycle human capital accumulation that features three potential theories, working respectively through cross-country differences in: selection, skill loss, and human capital accumulation. To distinguish between theories, we use new data on the characteristics of immigrants and non-migrants from a large set of countries. We conclude that the most likely theory is that immigrants from poor countries accumulate relatively less human capital in their birth countries before migrating. Our findings imply that life cycle human capital stocks are on average much larger in rich countries than poor countries.