What explains schooling differences across countries?

This paper provides a theory that explains the cross-country distribution of average years of schooling, as well as the so called human capital premium puzzle. In our theory, credit frictions as well as differences in access to public education, fertility and mortality turn out to be the key reasons why schooling differs across countries. Differences in growth rates and in wages are second order.

► An explanation of cross-country differences in average schooling is provided.
► Credit frictions are key to match both levels of schooling and returns to schooling.
► Family size and family income affect schooling choices when frictions are binding.
► Fertility, public education and mortality explain most of the schooling dispersion.