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Trade, Wage Gaps, and Specific Human Capital Accumulation

  • Ngo Van Long
  • Raymond Riezman
  • Antoine Soubeyran

We develop a new framework for the analysis of the impact of trade liberalization on the wage structure. 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.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2003/wp-cesifo-2003-04/cesifo_wp911.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 911.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_911
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  1. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  2. Donald R. Davis, 1996. "Does European Unemployment Prop up American Wages?," NBER Working Papers 5620, National Bureau of Economic Research, Inc.
  3. Falvey, Rod, 1999. "Trade liberalization and factor price convergence," Journal of International Economics, Elsevier, vol. 49(1), pages 195-210, October.
  4. Findlay, Ronald & Kierzkowski, Henryk, 1983. "International Trade and Human Capital: A Simple General Equilibrium Model," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 957-78, December.
  5. Edward E. Leamer, 1996. "What's the Use of Factor Contents?," NBER Working Papers 5448, National Bureau of Economic Research, Inc.
  6. Long, N.V. & Wong, K.Y., 1996. "Endogenous Growth and International Trade: A Survey," Discussion Papers in Economics at the University of Washington 96-07, Department of Economics at the University of Washington.
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