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Human capital formation in an open economy with increasing wage differentials

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  • TURRINI , Alessandro

    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

Abstract

Several developed countries are witnessing a trend towards an increasing gap in the earnings between skilled and unskilled workers. Though it is widely recognised that human capital formation programs through education and training should be strengthened in the presence of increasing wage differentials, it seems that this is not currently occurring to a satisfactory extent. We show an example where technology and terms of trade shocks that enhance the wage differential between high and low-skilled labour aggravate the underinvestment in public education arising from majority voting, thus leading to an undesirable outcome, both in terms of efficiency and equity.

Suggested Citation

  • TURRINI , Alessandro, 1997. "Human capital formation in an open economy with increasing wage differentials," CORE Discussion Papers 1997007, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:1997007
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    File URL: https://uclouvain.be/en/research-institutes/immaq/core/dp-1997.html
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    References listed on IDEAS

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    More about this item

    Keywords

    wage differentials; human capital; international trade; political economy;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F10 - International Economics - - Trade - - - General

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