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A Simple Model of Globalization, Schooling and Skill Acquisition

  • Carl Davidson
  • Nicholas Sly

We develop a model of schooling and skill acquisition, highlighting informational asymmetries that distort the incentives to educate. A key feature of our model is that education acts simultaneously as a signaling device and as a method for workers to enhance their productivity. We show that when firms can only imperfectly screen workers, the result is an economy in which too many workers purchase schooling and too few workers devote sufficient effort to their coursework to qualify for the high skill labor pool. We then examine how greater openness to international markets alters the skill mix of the domestic workforce and show that greater openness usually eases one labor market distortion while making the other distortion worse. Globalization impacts educational behavior and labor market outcomes differently as the extent of firms engaged in international markets varies, and affects wage inequality both within and across educational groups.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2013/wp-cesifo-2013-09/cesifo1_wp4394.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4394.

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Date of creation: 2013
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Handle: RePEc:ces:ceswps:_4394
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  1. Pavcnik, Nina, 2003. "What explains skill upgrading in less developed countries?," Journal of Development Economics, Elsevier, vol. 71(2), pages 311-328, August.
  2. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
  3. Daniel C. Hickman & William W. Olney, 2011. "Globalization and Investment in Human Capital," ILR Review, Cornell University, ILR School, vol. 64(4), pages 654-672, July.
  4. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September.
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  6. Stephen Redding & Peter K. Schott, 2003. "Distance, skill deepening and development: will peripheral countries ever get rich?," LSE Research Online Documents on Economics 3703, London School of Economics and Political Science, LSE Library.
  7. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
  8. Hartmut Egger & Udo Kreickemeier, 2008. "Fairness, Trade, and Inequality," CESifo Working Paper Series 2344, CESifo Group Munich.
  9. Spiros Bougheas & Richard Kneller & Raymond Riezman, . "Optimal Educational Policies and Comparative Advantage," Discussion Papers 09/02, University of Nottingham, GEP.
  10. Charles Wilson, 1980. "The Nature of Equilibrium in Markets with Adverse Selection," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 108-130, Spring.
  11. Vogel, Jonathan, 2007. "Institutions and moral hazard in open economies," Journal of International Economics, Elsevier, vol. 71(2), pages 495-514, April.
  12. Bernard, A., 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," Working papers 97-21, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. Ralph Chami & Dalia Hakura & Peter Montiel, 2010. "Do Worker Remittances Reduce Output Volatility in Developing Countries?," Center for Development Economics 2010-01, Department of Economics, Williams College.
  14. Bernard, Andrew B. & Jensen, J. Bradford & Schott, Peter K., 2006. "Trade costs, firms and productivity," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 917-937, July.
  15. Bernard, Andrew B. & Jensen, J Bradford & Redding, Stephen J. & Schott, Peter K., 2007. "Firms in International Trade," CEPR Discussion Papers 6277, C.E.P.R. Discussion Papers.
  16. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
  17. 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.
  18. William Blankenau & Gabriele Camera, 2006. "A Simple Economic Theory of Skill Accumulation and Schooling Decisions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(1), pages 93-115, January.
  19. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  20. Hanming Fang, 2006. "Disentangling The College Wage Premium: Estimating A Model With Endogenous Education Choices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1151-1185, November.
  21. Emily Blanchard & Gerald Willmann, 2013. "Trade, Education, and The Shrinking Middle Class," Kiel Working Papers 1831, Kiel Institute for the World Economy.
  22. Acemoglu, D. & Pischki, J.S., 1996. "Why Do Firms Train? Theory and Evidence," Working papers 96-7, Massachusetts Institute of Technology (MIT), Department of Economics.
  23. David Atkin, 2010. "Endogenous Skill Acquisition and Export Manufacturing in Mexico," Working Papers id:2506, eSocialSciences.
  24. Alla Lileeva & Daniel Trefler, 2010. "Improved Access to Foreign Markets Raises Plant-Level Productivity... for Some Plants," The Quarterly Journal of Economics, MIT Press, vol. 125(3), pages 1051-1099, August.
  25. Fernandes, Ana M., 2007. "Trade policy, trade volumes and plant-level productivity in Colombian manufacturing industries," Journal of International Economics, Elsevier, vol. 71(1), pages 52-71, March.
  26. Richard B. Freeman, 1975. "Overinvestment in College Training?," Journal of Human Resources, University of Wisconsin Press, vol. 10(3), pages 287-311.
  27. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, December.
  28. Colin Rose, 1993. "Equilibrium and Adverse Selection," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 559-569, Winter.
  29. Fabian Lange, 2007. "The Speed of Employer Learning," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 1-35.
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