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Human Capital Formation and International Trade

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Abstract

This paper develops a two-country, two-sector model of trade where the only difference between two countries is the cost of human capital formation. It is shown that this difference completely shapes the pattern of trade. Trade, in turn, affects the distribution of human capital both at extensive and intensive margins. Furthermore, cross-country differences in the costs of human capital formation determine the effects of trade on income distribution and welfare in each country. The paper also shows that lowering the cost of human capital acquisition in one country affects human capital formation, income distribution, and welfare asymmetrically in two countries.

Suggested Citation

  • Bulent Unel, 2013. "Human Capital Formation and International Trade," Departmental Working Papers 2013-01, Department of Economics, Louisiana State University.
    • Handle: RePEc:lsu:lsuwpp:2013-01
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    Cited by:

    1. Mingzhi Xu, 2020. "Globalization, the skill premium, and income distribution: the role of selection into entrepreneurship," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(3), pages 633-668, August.
    2. Dinopoulos, Elias & Heins, Gunnar & Tsoulouhas, Theofanis, 2024. "Effort, talent, and inequality in a small open economy," Journal of Economic Behavior & Organization, Elsevier, vol. 224(C), pages 248-265.
    3. Unel, Bulent, 2018. "Offshoring and unemployment in a credit-constrained economy," Journal of International Economics, Elsevier, vol. 111(C), pages 21-33.
    4. Elias Dinopoulos & Bulent Unel, 2017. "Managerial capital, occupational choice and inequality in a global economy," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(2), pages 365-397, May.
    5. Andrea Moro & Peter Norman, 2019. "Endogenous Comparative Advantage," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(3), pages 1088-1124, July.
    6. Can Li & Qi He & Han Ji, 2023. "Can Global Value Chain Upgrading Promote Regional Economic Growth? Empirical Evidence and Mechanism Analysis Based on City-Level Panel Data in China," Sustainability, MDPI, vol. 15(15), pages 1-22, July.
    7. Bulent Unel, 2019. "A model of occupational choice, offshoring and immigration," Review of International Economics, Wiley Blackwell, vol. 27(1), pages 267-289, February.
    8. Dinopoulos, Elias & Unel, Bulent, 2015. "Entrepreneurs, jobs, and trade," European Economic Review, Elsevier, vol. 79(C), pages 93-112.
    9. Petit, Sylvain, 2016. "International trade in services and inequalities: Empirical evaluation and role of tourism services," MPRA Paper 75206, University Library of Munich, Germany.
    10. Gnangnon, Sèna Kimm, 2022. "Effect of structural economic vulnerability on the participation in international trade," EconStor Preprints 262004, ZBW - Leibniz Information Centre for Economics.

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    More about this item

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • F1 - International Economics - - Trade
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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