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Human Capital Formation and International Trade

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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 intensive margins. Furthermore, cross-country differences in the costs of human capital formation determine the effects of trade on income distribution and welfare in each country. The paper also shows that lowering the cost of human capital acquisition in one country affects human capital formation, income distribution, and welfare asymmetrically in two countries.

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File URL: http://bus.lsu.edu/McMillin/Working_Papers/pap13_01.pdf
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Paper provided by Department of Economics, Louisiana State University in its series Departmental Working Papers with number 2013-01.

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Handle: RePEc:lsu:lsuwpp:2013-01

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  1. Bond, Eric W., 1986. "Entrepreneurial ability, income distribution, and international trade," Journal of International Economics, Elsevier, vol. 20(3-4), pages 343-356, May.
  2. Yongseok Shin & Joe Kaboski & Francisco J. Buera, 2008. "Finance and Development: A Tale of Two Sectors," 2008 Meeting Papers 955, Society for Economic Dynamics.
  3. Kevin O’rourke & Jeffrey Williamson, 2005. "From Malthus to Ohlin: Trade, Industrialisation and Distribution Since 1500," Journal of Economic Growth, Springer, vol. 10(1), pages 5-34, 01.
  4. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
  5. Spiros Bougheas & Raymond Riezman, 2005. "Trade and the Distribution of Human Capital," CESifo Working Paper Series 1475, CESifo Group Munich.
  6. Galor, Oded & Mountford, Andrew, 2008. "Trading Population for Productivity: Theory and Evidence," CEPR Discussion Papers 6678, C.E.P.R. Discussion Papers.
  7. Borsook, I., 1987. "Earnings, ability and international trade," Journal of International Economics, Elsevier, vol. 22(3-4), pages 281-295, May.
  8. Jota Ishikawa, 1996. "Scale Economies in Factor Supplies: International Trade, and Migration," Canadian Journal of Economics, Canadian Economics Association, vol. 29(3), pages 573-94, August.
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Cited by:
  1. Bulent Unel & Elias Dinopoulos, . "Entrepreneurs, Jobs, and Trade," Departmental Working Papers 2013-04, Department of Economics, Louisiana State University.

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