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A Simple Model of Globalization, Schooling and Skill Acquisition

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  • Carl Davidson
  • Nicholas Sly

Abstract

We develop a model of schooling and skill acquisition, highlighting informational asymmetries that distort the incentives to educate. A key feature of our model is that education acts simultaneously as a signaling device and as a method for workers to enhance their productivity. We show that when firms can only imperfectly screen workers, the result is an economy in which too many workers purchase schooling and too few workers devote sufficient effort to their coursework to qualify for the high skill labor pool. We then examine how greater openness to international markets alters the skill mix of the domestic workforce and show that greater openness usually eases one labor market distortion while making the other distortion worse. Globalization impacts educational behavior and labor market outcomes differently as the extent of firms engaged in international markets varies, and affects wage inequality both within and across educational groups.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2013/wp-cesifo-2013-09/cesifo1_wp4394.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4394.

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Date of creation: 2013
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Handle: RePEc:ces:ceswps:_4394

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  1. Vogel, Jonathan, 2007. "Institutions and moral hazard in open economies," Journal of International Economics, Elsevier, Elsevier, vol. 71(2), pages 495-514, April.
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  4. Stephen Redding & Peter K. Schott, 2003. "Distance, skill deepening and development: will peripheral countries ever get rich?," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 3703, London School of Economics and Political Science, LSE Library.
  5. Falvey, Rod & Greenaway, David & Silva, Joana, 2010. "Trade liberalisation and human capital adjustment," Journal of International Economics, Elsevier, Elsevier, vol. 81(2), pages 230-239, July.
  6. Ralph Chami & Dalia Hakura & Peter Montiel, 2010. "Do Worker Remittances Reduce Output Volatility in Developing Countries?," Center for Development Economics, Department of Economics, Williams College 2010-01, Department of Economics, Williams College.
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  9. Pavcnik, Nina, 2003. "What explains skill upgrading in less developed countries?," Journal of Development Economics, Elsevier, Elsevier, vol. 71(2), pages 311-328, August.
  10. William Blankenau & Gabriele Camera, 2006. "A Simple Economic Theory of Skill Accumulation and Schooling Decisions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(1), pages 93-115, January.
  11. Andrew Bernard & J. Bradford Jensen & Stephen Redding & Peter Schott, 2007. "Firms in International Trade," Working Papers 07-14, Center for Economic Studies, U.S. Census Bureau.
  12. Egger, Hartmut & Kreickemeier, Udo, 2012. "Fairness, trade, and inequality," Journal of International Economics, Elsevier, Elsevier, vol. 86(2), pages 184-196.
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  16. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, July.
  17. Spiros Bougheas & Richard Kneller & Raymond Riezman, 2011. "Optimal Education Policies And Comparative Advantage," Pacific Economic Review, Wiley Blackwell, Wiley Blackwell, vol. 16(5), pages 538-552, December.
  18. Hanming Fang, 2006. "Disentangling The College Wage Premium: Estimating A Model With Endogenous Education Choices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1151-1185, November.
  19. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
  20. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 87(3), pages 355-74, August.
  21. Alla Lileeva & Daniel Trefler, 2010. "Improved Access to Foreign Markets Raises Plant-Level Productivity... for Some Plants," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 125(3), pages 1051-1099, August.
  22. Emily Blanchard & Gerald Willmann, 2013. "Trade, Education, and the Shrinking Middle Class," CESifo Working Paper Series 4141, CESifo Group Munich.
  23. Fernandes, Ana M., 2003. "Trade policy, trade volumes, and plant-level productivity in Colombian manufacturing industries," Policy Research Working Paper Series 3064, The World Bank.
  24. Colin Rose, 1993. "Equilibrium and Adverse Selection," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 559-569, Winter.
  25. Bernard, Andrew B. & Jensen, J. Bradford & Schott, Peter K., 2006. "Trade costs, firms and productivity," Journal of Monetary Economics, Elsevier, Elsevier, vol. 53(5), pages 917-937, July.
  26. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, American Economic Association, vol. 90(5), pages 1160-1183, December.
  27. Fabian Lange, 2007. "The Speed of Employer Learning," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 25, pages 1-35.
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