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Distance, Skill Deepening and Development: Will Peripheral Countries Ever Get Rich?

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Author Info
Stephen Redding
Peter K. Schott

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Abstract

This paper models the relationship between countries' distance from global economic activity, endogenous investments in education, and economic development. Firms in remote locations pay greater trade costs on both exports and intermediate imports, reducing the amount of value added left to remunerate domestic factors of production. If skill-intensive sectors have higher trade costs, more pervasive input-output linkages, or stronger increasing returns to scale, we show theoretically that remoteness depresses the skill premium and therefore incentives for human capital accumulation. Empirically, we exploit structural relationships from the model to demonstrate that countries with lower market access have lower levels of educational attainment. We also show that the world's most peripheral countries are becoming increasingly remote over time.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9447.

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Date of creation: Jan 2003
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Handle: RePEc:nbr:nberwo:9447

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F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade

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Cited by:
(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. Maarten Bosker & Harry Garretsen, 2008. "Economic Geography and Economic Development in Sub-Saharan Africa," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. Stephen Redding, 2009. "Economic Geography: A Review of the Theoretical and Empirical Literature," CEP Discussion Papers dp0904, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  3. Mion, Giordano & Naticchioni, Paolo, 2007. "The spatial sorting and matching of skills and firms," MPRA Paper 1721, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  4. Bigsten, Arne, 2006. "Aid and Economic Development in Africa," Working Papers in Economics 237, Göteborg University, Department of Economics. [Downloadable!]
  5. Head, Charles Keith & Mayer, Thierry, 2005. "Regional Wage and Employment Responses to Market Potential in the EU," CEPR Discussion Papers 4908, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  6. Hayakawa, Kazunobu, 2009. "Market Access and Intermediate Goods Trade," IDE Discussion Papers 208, Institute of Developing Economies, Japan External Trade Organization(JETRO). [Downloadable!]
  7. Matthee, Marianne & Naude, Wim, 2007. "The Determinants of Regional Manufactured Exports from a Developing Country," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  8. Nuno Crespo & Maria Paula Fontoura, 2006. "Economic centrality, per capita income and human capital – some results at regional level," Working Papers 2006/28, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
  9. Combes, Pierre-Philippe & Lafourcade, Miren, 2003. "Core-Periphery Patterns of Generalized Transport Costs: France, 1978-98," CEPR Discussion Papers 3958, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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