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Skill acquisition, credit constraints, and trade

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  • Chesnokova, Tatyana
  • Krishna, Kala

Abstract

In this paper we develop a general equilibrium model where credit constraints limit the ability of agents with heterogeneous abilities and wealth to acquire skills. We identify a new effect, the induced Rybczynski effect, that works in the opposite direction from the normal supply response and may result in relative supply being downward-sloping. We analyze the effects of trade and show that under some conditions trade may reduce welfare. Finally, we study the effects of trade on income distribution and inequality.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 18 (2009)
Issue (Month): 2 (March)
Pages: 227-238

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Handle: RePEc:eee:reveco:v:18:y:2009:i:2:p:227-238

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Web page: http://www.elsevier.com/locate/inca/620165

Related research

Keywords: Credit constraint Skill formation;

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References

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  1. Eicher, Theo S., 1999. "Trade, development and converging growth rates: Dynamic gains from trade reconsidered," Journal of International Economics, Elsevier, vol. 48(1), pages 179-198, June.
  2. Acemoglu, Daron & Pischke, Jörn-Steffen, 1996. "Why do Firms Train? Theory and Evidence," CEPR Discussion Papers 1460, C.E.P.R. Discussion Papers.
  3. Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts of American Males," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 262-333, April.
  4. 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.
  5. Lawrence F. Katz & Claudia Goldin, 2001. "The Legacy of U.S. Educational Leadership: Notes on Distribution and Economic Growth in the 20th Century," American Economic Review, American Economic Association, vol. 91(2), pages 18-23, May.
  6. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 539-572, June.
  7. Acemoglu, Daron, 1997. "Training and Innovation in an Imperfect Labour Market," Review of Economic Studies, Wiley Blackwell, vol. 64(3), pages 445-64, July.
  8. Kerwin Kofi Charles & Erik Hurst, 2003. "The Correlation of Wealth across Generations," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1155-1182, December.
  9. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
  10. Flug, Karnit & Spilimbergo, Antonio & Wachtenheim, Erik, 1998. "Investment in education: do economic volatility and credit constraints matter?," Journal of Development Economics, Elsevier, vol. 55(2), pages 465-481, April.
  11. Cartiglia, Filippo, 1997. "Credit constraints and human capital accumulation in the open economy," Journal of International Economics, Elsevier, vol. 43(1-2), pages 221-236, August.
  12. Daron Acemoglu & Jorn-Steffen Pischke, 1998. "Beyond Becker: Training in Imperfect Labor Markets," NBER Working Papers 6740, National Bureau of Economic Research, Inc.
  13. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1153-89, December.
  14. Michael P. Keane, 2002. "Financial Aid, Borrowing Constraints, and College Attendance: Evidence from Structural Estimates," American Economic Review, American Economic Association, vol. 92(2), pages 293-297, May.
  15. Booth, Alison L & Chatterji, Monojit, 1998. "Unions and Efficient Training," Economic Journal, Royal Economic Society, vol. 108(447), pages 328-43, March.
  16. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-34, August.
  17. Ranjan, Priya, 2003. "Trade induced convergence through human capital accumulation in credit-constrained economies," Journal of Development Economics, Elsevier, vol. 72(1), pages 139-162, October.
  18. Ranjan, Priya, 2001. "Dynamic evolution of income distribution and credit-constrained human capital investment in open economies," Journal of International Economics, Elsevier, vol. 55(2), pages 329-358, December.
  19. Chang, Chun & Wang, Yijiang, 1996. "Human Capital Investment under Asymmetric Information: The Pigovian Conjecture Revisited," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 505-19, July.
  20. Keane, Michael P & Wolpin, Kenneth I, 2001. "The Effect of Parental Transfers and Borrowing Constraints on Educational Attainment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1051-1103, November.
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Citations

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Cited by:
  1. Alexander Monge-Naranjo, 2012. "Foreign firms and the diffusion of knowledge," Working Papers 2012-055, Federal Reserve Bank of St. Louis.
  2. Bonfatti, Roberto & Ghatak, Maitreesh, 2011. "Trade and the Skill Premium Puzzle with Capital Market Imperfections," CEPR Discussion Papers 8286, C.E.P.R. Discussion Papers.
  3. Pfeiffer, Friedhelm & Reuß, Karsten, 2007. "Age-dependent Skill Formation and Returns to Education," ZEW Discussion Papers 07-015, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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