Organizational Skills and Management in the Theory of Economic Development

Abstract: The present paper explores the acquisition of management and organizational skills as a potential engine of growth in GDP per capita. It is posited that such skills acquisi-tion occurs as a natural by-product of the production process. The analysis demonstrates that when these are the unique source of productivity growth, such skills, even if fully rewarded, and competitively provided, may be consistent with negligible returns to measured experience. The contribution of such an avenue will thus not generally be correctly measured by standard growth accounting procedures, which will instead suggest productivity differences that arise due to un-derlying technology differences. It is argued here that management and organizational skills as a source of development generate predictions that are consistent with the empirical record, and that explains cross country GDP per capita differences without the need to posit a disembodied factor, and without the need to posit implausibly large externalities. It is also consistent with observed migration patterns. 1