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Impact of Capital Market Integration on Skilled-Unskilled Labor Choice

Author

Listed:
  • Tsubuku, Masafumi

    (Nagoya University)

  • Ogawa, Hikaru

    (University of Tokyo)

Abstract

This study examines how capital market integration, induced by globalization, affects skilled-unskilled labor choices. Our results show that market integration fosters competition for mobile capital among countries, inducing governments to employ domestic policies that are favorable for skilled workers. These policy changes induce individuals to become skilled workers, thereby raising the skilled-unskilled labor ratio. We examine the efficiency of the aforementioned ratio in integrated markets and show that the supply of skilled (unskilled) labor in equilibrium is excessive (deficient) because education in one country might create negative externalities in others.

Suggested Citation

  • Tsubuku, Masafumi & Ogawa, Hikaru, 2017. "Impact of Capital Market Integration on Skilled-Unskilled Labor Choice," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 32(1), pages 90-111.
    • Handle: RePEc:ris:integr:0708
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    More about this item

    Keywords

    Capital Tax Competition; Skilled Labor; Unskilled Labor; Market Integration;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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