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Skill acquisition and the dynamics of trade-induced inequality

Author

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  • Danziger, Eliav

Abstract

I develop and calibrate a dynamic general-equilibrium trade model with endogenous skill demand and supply. Simulations show that removing US trade barriers would lead to aggregate gains in the United States of 4.5%. Individual workers' gains, however, depend on their education, age and birth cohort. The biggest winners, the oldest educated workers alive during trade liberalization, gain 6.7%, while their uneducated peers gain the least, only 1.2%. A major finding is that ignoring either the endogeneity of the skill supply or the post-liberalization dynamics, as the existing literature does, leads to a substantial bias in the quantitative assessment of trade liberalization.

Suggested Citation

  • Danziger, Eliav, 2017. "Skill acquisition and the dynamics of trade-induced inequality," Journal of International Economics, Elsevier, vol. 107(C), pages 60-74.
    • Handle: RePEc:eee:inecon:v:107:y:2017:i:c:p:60-74
    DOI: 10.1016/j.jinteco.2017.03.006
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    Citations

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    Cited by:

    1. Mingzhi Xu, 2020. "Globalization, the skill premium, and income distribution: the role of selection into entrepreneurship," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(3), pages 633-668, August.
    2. Ma, Xiao & Nakab, Alejandro, 2020. "Comparative Advantage and Human Capital: A Cross-country Quantitative Analysis," MPRA Paper 110267, University Library of Munich, Germany, revised Sep 2020.
    3. Yang, Han, 2019. "Dynamic Trade, Education and Intergenerational Inequality," MPRA Paper 96054, University Library of Munich, Germany.
    4. Andrea Moro & Peter Norman, 2019. "Endogenous Comparative Advantage," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(3), pages 1088-1124, July.
    5. Ghose,Devaki, 2021. "Trade, Internal Migration, and Human Capital : Who Gains from India’s IT Boom?," Policy Research Working Paper Series 9738, The World Bank.
    6. Ma, Xiao & Nakab, Alejandro & Zhang, Yiran, 2023. "Skill Acquisition and the Gains from Trade: A Cross-country Quantitative Analysis," MPRA Paper 117808, University Library of Munich, Germany.
    7. Falvey, Rod & Greenaway, David & Silva, Joana, 2010. "Trade liberalisation and human capital adjustment," Journal of International Economics, Elsevier, vol. 81(2), pages 230-239, July.
    8. Chihiro INABA & Noritsugu NAKANISHI, 2022. "Effects of Globalization on Educational Choice and Unemployment under Search Friction," Discussion Papers 2205, Graduate School of Economics, Kobe University.
    9. Axelle Ferriere & Gaston Navarro & Ricardo Reyes-Heroles, 2018. "Escaping the Losses from Trade: The Impact of Heterogeneity on Skill Acquisition," 2018 Meeting Papers 1248, Society for Economic Dynamics.
    10. Zhao, Liqiu & Wang, Fei & Zhao, Zhong, 2021. "Trade liberalization and child labor," China Economic Review, Elsevier, vol. 65(C).

    More about this item

    Keywords

    Trade liberalization; Wage inequality; Skill premium; Education;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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