cross-country differences in the firm size distribution and productivity. The hypothesis that the availability of managerial know-how grows with economic development is supported by the evidence in Hjort et al. (2022), which exploits data from a global consulting company to show that the relative remuneration of middle managers is much higher in poor countries.

**More generally, a growing literature documents the key role played by managers for firm-level performance.** The World Management Survey has collected detailed firm-level information on managerial practices over the past two decades, showing a wide variation across firms and countries closely associated to differences in productivity (Bloom and Reenen, 2007; Bloom et al., 2014). Moreover, the randomized controlled trial in Bloom et al. (2013) supports the existence of a causal relationship between managerial practices and performance, as plants that were randomly provided with free managerial consulting saw faster growth in total factor productivity and a persistent increase in the probability of adopting modern management practices. Consistently with the literature on human capital and firms discussed above, managers’ education and know-how are commonly found to be positively associated with more effective managerial practices and firm-level upgrading (Bloom et al., 2014; Verhoogen, 2021).

# **3.5 Misallocation of Talent**

**A key factor mediating the impact of human capital on economic performance is the allocation of talent.** It is self-evident that workers vary widely in their comparative advantage for different occupations and tasks, as a function of their education, experience and idiosyncratic ability (Figure VII.e). Models of occupational choice such as Roy (1951) make it clear that frictions that prevent workers from pursing their comparative advantage are detrimental to aggregate productivity, partially undermining the positive effects of investments in the accumulation of skills (Figure VII.l). A growing literature attempts to quantify the extent of the misallocation of talent and associated productivity losses in various contexts.

**Several studies emphasize the misallocation resulting from discrimination and social norms against specific demographic groups.** Hsieh et al. (2019) documents that the occupational distribution of women and black men has changed dramatically in the United States since the 1960s, and concludes that the relaxation of the labor market barriers faced by these groups can explain between 20% and 40% of the observed economic growth. Ashraf et al. (2022) exploit personnel data from a multinational firm active in many countries to show that women’s wages are higher for countries with lower female labor force participation, consistently with the idea that these labor markets are characterized by larger barriers faced by women (and hence more positively selected female workers). Hurst et al. (2021) provides more evidence on the barriers faced by black workers, showing that in the United States the discrimination against this group is stronger for occupations involving interaction with others, suggesting that the growing demand for these tasks might underlie the stagnation of the wage race gap since the 1980s. It is plausible that the relaxation of these barriers might itself encourage human capital

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