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Human Capital Formation and International Trade

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  • Unel Bulent

    (Department of Economics, Louisiana State University, Baton Rouge, LA 70803, USA)

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 at intensive margins, income distribution, and welfare in each country. Since not all agents gain from trade, the paper also investigates the conditions under which trade between two countries becomes possible if the final decision in each country is based on majority voting. Finally, the paper shows that lowering the cost of human capital in one country has asymmetric effects on human capital formation and the income inequality between skilled and unskilled workers across countries.

Suggested Citation

  • Unel Bulent, 2015. "Human Capital Formation and International Trade," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(3), pages 1067-1092, July.
    • Handle: RePEc:bpj:bejeap:v:15:y:2015:i:3:p:1067-1092:n:5
    DOI: 10.1515/bejeap-2014-0041
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    Cited by:

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    2. Elias Dinopoulos & Bulent Unel, 2017. "Managerial capital, occupational choice and inequality in a global economy," Canadian Journal of Economics, Canadian Economics Association, vol. 50(2), pages 365-397, May.
    3. Andrea Moro & Peter Norman, 2019. "Endogenous Comparative Advantage," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(3), pages 1088-1124, July.
    4. Gnangnon, Sèna Kimm, 2022. "Effect of structural economic vulnerability on the participation in international trade," EconStor Preprints 262004, ZBW - Leibniz Information Centre for Economics.
    5. Petit, Sylvain, 2016. "International trade in services and inequalities: Empirical evaluation and role of tourism services," MPRA Paper 75206, University Library of Munich, Germany.
    6. Bulent Unel, 2019. "A model of occupational choice, offshoring and immigration," Review of International Economics, Wiley Blackwell, vol. 27(1), pages 267-289, February.
    7. Dinopoulos, Elias & Unel, Bulent, 2015. "Entrepreneurs, jobs, and trade," European Economic Review, Elsevier, vol. 79(C), pages 93-112.
    8. Unel, Bulent, 2018. "Offshoring and unemployment in a credit-constrained economy," Journal of International Economics, Elsevier, vol. 111(C), pages 21-33.
    9. 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.

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