Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/93098
Authors: 
Prettner, Klaus
Strulik, Holger
Year of Publication: 
2014
Series/Report no.: 
Discussion Papers, Center for European Governance and Economic Development Research 191
Abstract: 
We generalize a trade model with firm-specific heterogeneity and R&D-based growth to allow for an endogenous education decision of households and an endogenously evolving population. Our framework is able to explain cross-country differences in living standards and trade intensities by the differential pace of human capital accumulation among industrialized countries. Consistent with the empirical evidence, scale matters for relative economic prosperity as long as countries are closed, whereas scale does not matter in a fully globalized world. Interestingly, however, the average human capital level of a country influences its relative economic prosperity irrespective of its trade-openness. While being consistent with the empirical evidence, our framework has the additional advantage that steady-state growth of income does not hinge on the unrealistic assumption of an ever expanding population.
Subjects: 
technological progress
globalization
demographic change
education
human capital accumulation
JEL: 
F10
I25
O31
O41
Document Type: 
Working Paper

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