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Human capital, unemployment, and relative wages in a global economy

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Author Info
Donald R. Davis
Trevor A. Reeve

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Abstract

This paper develops a simple framework for examining human capital accumulation, unemployment, and relative wages in a global economy. It builds on the models of Davis (1998a, b) of trade between a flexible-wage America and a rigid-wage Europe. To this it adds a model of human capital accumulation based on Findlay and Kierzkowski (1983). A variety of comparative statics are examined, including changes in educational capital and population, entry of new countries to the trading world, technical change, and a productivity slowdown. We derive the consequences for the skilled-to unskilled wage gap, unemployment, and skill composition.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 659.

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Date of creation: 2000
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Handle: RePEc:fip:fedgif:659

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Related research
Keywords: International trade ; Human capital ; Unemployment ; Wages;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Bertola, Giuseppe & Ichino, Andrea, 1995. "Wage Inequality and Unemployment: US vs Europe," CEPR Discussion Papers 1186, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Paul Krugman & Robert Lawrence, 1993. "Trade, Jobs, and Wages," NBER Working Papers 4478, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Acemoglu, Daron, 1996. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," CEPR Discussion Papers 1459, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1995-1), pages 327-377. [Downloadable!]
  5. Flug, Karnit & Galor, Oded, 1986. "Minimum Wage in a General Equilibrium Model of International Trade and Human Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 149-64, February. [Downloadable!] (restricted)
  6. Sanyal, Kalyan K & Jones, Ronald W, 1982. "The Theory of Trade in Middle Products," American Economic Review, American Economic Association, vol. 72(1), pages 16-31, March. [Downloadable!] (restricted)
  7. Hoon, Hian Teck, 1991. "Comparative advantage and the equilibrium rate of unemployment," Economics Letters, Elsevier, vol. 37(3), pages 299-304, November. [Downloadable!] (restricted)
  8. Davis, Donald R., 1998. "Technology, unemployment, and relative wages in a global economy," European Economic Review, Elsevier, vol. 42(9), pages 1613-1633, November. [Downloadable!] (restricted)
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  9. 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. [Downloadable!] (restricted)
  10. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 367-97, May. [Downloadable!] (restricted)
  11. Davis, Donald R, 1998. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade," American Economic Review, American Economic Association, vol. 88(3), pages 478-94, June. [Downloadable!] (restricted)
  12. Donald R. Davis, 1996. "Does European Unemployment Prop Up American Wages?," Harvard Institute of Economic Research Working Papers 1752, Harvard - Institute of Economic Research.
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  13. Brecher, Richard A & Long, Ngo Van, 1989. "Trade Unions in an Open Economy: A General Equilibrium Analysis," The Economic Record, The Economic Society of Australia, vol. 65(190), pages 234-39, September.
  14. Eli Berman & John Bound & Stephen Machin, 1998. "Implications Of Skill-Biased Technological Change: International Evidence," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1245-1279, November. [Downloadable!] (restricted)
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  15. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
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  16. Brecher, Richard A, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 88(1), pages 98-116, February. [Downloadable!] (restricted)
  17. Fernandez, Raquel, 1992. "Terms-of-Trade Uncertainty, Incomplete Markets and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(4), pages 881-94, November. [Downloadable!] (restricted)
  18. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1991. "Multiple free trade equilibria in micro models of unemployment," Journal of International Economics, Elsevier, vol. 31(1-2), pages 157-169, August. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Saccone Donatella, 2008. "Economic openness, skill demand and skill supply in three archetypes of developing countries: A theoretical and empirical investigation," Department of Economics Working Papers 200813, University of Turin. [Downloadable!]
  2. Paul Oslington, 2000. "Factor Market Linkages in a Global Economy," Economics Series Working Papers 038, University of Oxford, Department of Economics. [Downloadable!]
    Other versions:
  3. Jürgen Meckl, 2005. "Are US Wages Really Determined by European Labor-Market Institutions?," IZA Discussion Papers 1817, Institute for the Study of Labor (IZA). [Downloadable!]
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