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Human Capital, Unemployment and Relative Wages in a Global Economy

  • Donald R. Davis
  • Trevor A. Reeve

This paper develops a simple framework for examining human capital accumulation, unemployment, and relative wages in a global economy. It builds on the models of Davis (1997a,b) of trade between a flexible wage America and a rigid wage Europe. To this it adds a model of human capital accumulation based on Findlay and Kierzkowski (1983). A variety of comparative statics are examined, including changes in educational capital and population, entry of new countries to the trading world, techniucal change, and a productivity slowdown. We derive the consequences for the skillled-to-unskilled wage gap, unemployment, and skill composition.

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Paper provided by Harvard - Institute of Economic Research in its series Harvard Institute of Economic Research Working Papers with number 1804.

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Date of creation: 1997
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Handle: RePEc:fth:harver:1804
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  1. Brecher, Richard A & Long, Ngo Van, 1989. "Trade Unions in an Open Economy: A General Equilibrium Analysis," The Economic Record, The Economic Society of Australia, vol. 65(190), pages 234-39, September.
  2. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 327-377.
  3. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, October.
  4. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 367-97, May.
  5. Berman, E. & Bound, J. & Machin, S., 1997. "Implications of Skill-Biased Technological Change: International Evidence," Papers 25, Centre for Economic Performance & Institute of Economics.
  6. Donald R. Davis, 1996. "Technology, Unemployment, and Relative Wages in a Global Economy," NBER Working Papers 5636, National Bureau of Economic Research, Inc.
  7. 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.
  8. Edward E. Leamer, 1996. "In Search of Stolper-Samuelson Effects on U.S. Wages," NBER Working Papers 5427, National Bureau of Economic Research, Inc.
  9. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1991. "Multiple free trade equilibria in micro models of unemployment," Journal of International Economics, Elsevier, vol. 31(1-2), pages 157-169, August.
  10. Brecher, Richard A, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 88(1), pages 98-116, February.
  11. Melvin, James R, 1969. "Intermediate Goods, the Production Possibility Curve, and Gains from Trade," The Quarterly Journal of Economics, MIT Press, vol. 83(1), pages 141-51, February.
  12. Hoon, Hian Teck, 1991. "Comparative advantage and the equilibrium rate of unemployment," Economics Letters, Elsevier, vol. 37(3), pages 299-304, November.
  13. Paul Krugman & Robert Lawrence, 1993. "Trade, Jobs, and Wages," NBER Working Papers 4478, National Bureau of Economic Research, Inc.
  14. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  15. Daron Acemoglu, 1998. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," NBER Working Papers 6658, National Bureau of Economic Research, Inc.
  16. Sanyal, Kalyan K & Jones, Ronald W, 1982. "The Theory of Trade in Middle Products," American Economic Review, American Economic Association, vol. 72(1), pages 16-31, March.
  17. Fernandez, Raquel, 1992. "Terms-of-Trade Uncertainty, Incomplete Markets and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(4), pages 881-94, November.
  18. Donald R. Davis, 1996. "Does European Unemployment Prop Up American Wages?," Harvard Institute of Economic Research Working Papers 1752, Harvard - Institute of Economic Research.
  19. Davis, Donald R, 1998. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade," American Economic Review, American Economic Association, vol. 88(3), pages 478-94, June.
  20. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  21. Bertola, Giuseppe & Ichino, Andrea, 1995. "Wage Inequality and Unemployment: US vs Europe," CEPR Discussion Papers 1186, C.E.P.R. Discussion Papers.
  22. Flug, Karnit & Galor, Oded, 1986. "Minimum Wage in a General Equilibrium Model of International Trade and Human Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 149-64, February.
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