Trade, Wage Gaps, and Specific Human Capital Accumulation
We develop a new framework for the analysis of the impact of trade liberalization on the wage structure and on welfare. Our model focuses on the decision of workers to accumulate firm-specific skills, by "on-the-job" training, knowing that this means their future wages will have to be negotiated, and that the outcome of negotiation will depend on the profitability prospect of firms operating in a new trading environment. We show that trade liberalization may reduce the welfare of a developing country because of its adverse effect on skill accumulation. We also explore the effects of trade liberalization on the wage gap between skilled and unskilled workers. Copyright © 2007 The Authors.
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Volume (Year): 15 (2007)
Issue (Month): 1 (February)
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References listed on IDEAS
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