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Trade, Wage Gaps, and Specific Human Capital Accumulation

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  • Ngo Van Long
  • Raymond Riezman
  • Antoine Soubeyran

Abstract

We develop a new framework for the analysis of the impact of trade liberalization on the wage structure and on welfare. Our model focuses on the decision of workers to accumulate firm-specific skills, by "on-the-job" training, knowing that this means their future wages will have to be negotiated, and that the outcome of negotiation will depend on the profitability prospect of firms operating in a new trading environment. We show that trade liberalization may reduce the welfare of a developing country because of its adverse effect on skill accumulation. We also explore the effects of trade liberalization on the wage gap between skilled and unskilled workers. Copyright � 2007 The Authors.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 15 (2007)
Issue (Month): 1 (02)
Pages: 75-92

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Handle: RePEc:bla:reviec:v:15:y:2007:i:1:p:75-92

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References

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  1. R. Falvey,, . "Trade Liberalization and Factor Price Convergence," Discussion Papers 96/17, University of Nottingham, CREDIT.
  2. Long, N.V. & Wong, K.Y., 1996. "Endogenous Growth and International Trade: A Survey," Working Papers 96-07, University of Washington, Department of Economics.
  3. Edward E. Leamer, 1996. "What's the Use of Factor Contents?," NBER Working Papers 5448, National Bureau of Economic Research, Inc.
  4. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  5. Donald R. Davis, 1996. "Does European Unemployment Prop up American Wages?," NBER Working Papers 5620, National Bureau of Economic Research, Inc.
  6. 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 957-78, December.
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Cited by:
  1. Spiros Bougheas & Richard Kneller & Raymond Riezman, . "Optimal Educational Policies and Comparative Advantage," Discussion Papers 09/02, University of Nottingham, GEP.
  2. Anwar, Sajid & Sun, Sizhong, 2012. "Trade liberalisation, market competition and wage inequality in China's manufacturing sector," Economic Modelling, Elsevier, vol. 29(4), pages 1268-1277.
  3. Wang, Ming-cheng & Fang, Chen-ray & Huang, Li-hsuan, 2009. "International knowledge spillovers and wage inequality in developing countries," Economic Modelling, Elsevier, vol. 26(6), pages 1208-1214, November.
  4. Rod Falvey & David Greenaway & Joana Silva, . "Trade Liberalisation and Human Capital Adjustment," Discussion Papers 07/34, University of Nottingham, GEP.
  5. Blanchard, Emily & Willmann, Gerald, 2011. "Escaping a protectionist rut: Policy mechanisms for trade reform in a democracy," Journal of International Economics, Elsevier, vol. 85(1), pages 72-85, September.
  6. Rod Falvey & David Greenaway & Joana Silva, . "International Competition, Returns to Skill and Labor Market Adjustment," Discussion Papers 08/10, University of Nottingham, GEP.
  7. Harris, Richard G. & Robertson, Peter E., 2013. "Trade, wages and skill accumulation in the emerging giants," Journal of International Economics, Elsevier, vol. 89(2), pages 407-421.
  8. Antoni, Manfred & Janser, Markus & Lehmer, Florian, 2014. "The hidden winners of renewable energy promotion : insights into sector-specific wage differentials," IAB Discussion Paper 201412, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  9. Willmann, Gerald & Blanchard, Emily J., 2007. "Political Stasis or Protectionist Rut? Policy Mechanisms for Trade Reform in a Democracy," Economics Working Papers 2007,21, Christian-Albrechts-University of Kiel, Department of Economics.
  10. Viet Do & Ngo Van Long, 2007. "International Outsourcing under Monopolistic Competition: Winners and Losers," CESifo Working Paper Series 2034, CESifo Group Munich.
  11. Anwar, Sajid & Rice, John, 2009. "Labour mobility and wage inequality in the presence of endogenous foreign investment," Economic Modelling, Elsevier, vol. 26(6), pages 1135-1139, November.

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