Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/128092
Authors: 
Auer, Raphael A.
Year of Publication: 
2015
Series/Report no.: 
Working Paper, Study Center Gerzensee 15.03
Abstract: 
This paper examines the cross-country income and welfare consequences of trade-induced human capital (dis-)accumulation. The model is based on heterogeneous workers who make educational decisions in the presence of complete markets. When such heterogeneous workers invest in schooling, high type agents earn a surplus from their investment. In the presence of cross-country differences in skill-augmenting technology, trade shifts this surplus to rich countries that can use skills more efficiently. Thus, while the static gains from trade may lead to convergence, the dynamic gains from trade occur to initially rich countries, thus leading to cross-country divergence of income and welfare. The second part of the paper endogenizes world prices, documenting that as trade liberalization concentrates skills in countries with a high level of skill augmenting technology, it thereby increases the effective global supply of skilled labor. Despite the resulting decline in the price of skill-intensive goods, trade is shown to be skill-biased.
Subjects: 
Factor Content of Trade
Employment
Human Capital
Economic Growth
JEL: 
F11
F14
F16
Document Type: 
Working Paper

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