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Human Capital, Unemployment and Relative Wages in a Global Economy

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  • Donald R. Davis
  • Trevor A. Reeve

Abstract

This paper develops a simple framework for examining human capital accumulation, unemployment, and relative wages in a global economy. It builds on the models of Davis (1997a,b) of trade between a flexible wage America and a rigid wage Europe. To this it adds a model of human capital accumulation based on Findlay and Kierzkowski (1983). A variety of comparative statics are examined, including changes in educational capital and population, entry of new countries to the trading world, techniucal change, and a productivity slowdown. We derive the consequences for the skillled-to-unskilled wage gap, unemployment, and skill composition.

Suggested Citation

  • Donald R. Davis & Trevor A. Reeve, 1997. "Human Capital, Unemployment and Relative Wages in a Global Economy," Harvard Institute of Economic Research Working Papers 1804, Harvard - Institute of Economic Research.
    • Handle: RePEc:fth:harver:1804
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    1. Findlay, Ronald & Kierzkowski, Henryk, 1983. "International Trade and Human Capital: A Simple General Equilibrium Model," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 957-978, December.
    2. Daron Acemoglu, 1999. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," American Economic Review, American Economic Association, vol. 89(5), pages 1259-1278, December.
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    Cited by:

    1. Ann L. Owen, 1999. "International Trade and the Accumulation of Human Capital," Southern Economic Journal, John Wiley & Sons, vol. 66(1), pages 61-81, July.
    2. Sener, Fuat, 2001. "Schumpeterian unemployment, trade and wages," Journal of International Economics, Elsevier, vol. 54(1), pages 119-148, June.
    3. Saccone Donatella, 2008. "Economic openness, skill demand and skill supply in three archetypes of developing countries: a theoretical and empirical investigation," Department of Economics and Statistics Cognetti de Martiis. Working Papers 200813, University of Turin.
    4. Chakraborty, Bidisha & Chakraborty, Kamalika, 2016. "Low Level Equilibrium Trap, Unemployment, School Quality, Child Labour and Human Capital Formation," MPRA Paper 74621, University Library of Munich, Germany.
    5. Ann L. Owen, 1999. "International Trade and the Accumulation of Human Capital," Southern Economic Journal, Southern Economic Association, vol. 66(1), pages 61-81, July.
    6. Meckl, Jürgen, 2005. "Are US Wages Really Determined by European Labor-Market Institutions?," IZA Discussion Papers 1817, Institute of Labor Economics (IZA).
    7. Yose Rizal Damuri & Raymond Atje & Arya B. Gaduh, 2006. "Integration and Trade Specialization in East Asia," Trade Working Papers 21995, East Asian Bureau of Economic Research.
    8. Borghans,L. & Grip,A.,de, 1999. "Skills and low pay: upgrading or overeducation?," ROA Research Memorandum 005, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    9. Robert Stehrer, 2004. "Can Trade Explain the Sector Bias of Skill-biased Technical Change?," wiiw Working Papers 30, The Vienna Institute for International Economic Studies, wiiw.
    10. Redding, Stephen, 2002. "Specialization dynamics," Journal of International Economics, Elsevier, vol. 58(2), pages 299-334, December.
    11. Hollanders, Hugo & Weel, Bas ter, 1999. "Skill-Biased Technical Change: On Endogenous Growth, Wage Inequality and Government Intervention," Research Memorandum 013, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    12. Das, Satya P., 2006. "Trade, skill acquisition and distribution," Journal of Development Economics, Elsevier, vol. 81(1), pages 118-141, October.
    13. Ann L. Owen, 1999. "International Trade and the Accumulation of Human Capital," Southern Economic Journal, John Wiley & Sons, vol. 66(1), pages 61-81, July.
    14. Muysken, Joan & Weel, Bas ter, 1999. "Overeducation, Job Competition and Unemployment," Research Memorandum 030, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    15. Rossana Patrón, 2009. "Trade liberalization in a Heckscher–Ohlin model: Does public skill formation change the conventional results?," Documentos de Trabajo (working papers) 1809, Department of Economics - dECON.
    16. Kamalika Chakraborty & Bidisha Chakraborty, 2018. "Low level equilibrium trap, unemployment, efficiency of education system, child labour and human capital formation," Journal of Economics, Springer, vol. 125(1), pages 69-95, September.

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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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