Meritocracy Across Countries

We study the micro sources and macro consequences of worker–job matching across coun- tries with large income differences. Using internationally comparable data on over 120,000 in- dividuals in 30 countries, we document that workers’ skills align more closely with their jobs’ skill requirements in higher-income countries, indicative of more meritocratic labor market matching. We interpret this fact through an equilibrium matching model with cross-country differences in three fundamentals: (i) endowments of worker skills and job requirements de- termining match feasibility; (ii) technology determining the returns to matching; and (iii) id- iosyncratic frictions capturing how nonproductive traits affect matching. A development- accounting exercise based on the model, estimated separately for each country, shows that variation in matching frictions explains only a small share of cross-country output gaps. How- ever, improved worker–job matching substantially amplifies the gains from adopting frontier endowments and technology.