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Comparative Advantage and Human Capital: A Cross-country Quantitative Analysis

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Listed:
  • Ma, Xiao
  • Nakab, Alejandro

Abstract

Trade openness can affect welfare through changes in workers’ skill acquisition. We develop a multisector Eaton–Kortum model, in which skill intensities and on-the-job learning opportunities are heterogeneous across sectors. Workers decide whether to become skilled before entering the labor market and accumulate human capital on the job. Through the lens of our model, trade-induced sector reallocation changes the returns of becoming skilled and on-the-job learning opportunities. Our model allows for an analytical formula of the gains from trade. This formula is an augmented version of the ACR formula and includes gains due to changes in skill acquisition. Our calibrated model suggests that the gains from trade due to changes in skill acquisition are vastly different across countries and may be negative, with sizable gains for the United States, the United Kingdom, and India, as well as considerable losses for Germany, Brazil, and Argentina.

Suggested Citation

  • 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.
    • Handle: RePEc:pra:mprapa:110267
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    References listed on IDEAS

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    More about this item

    Keywords

    international trade; sector reallocation; gains from trade; skill acquisition; human capital; college education; on-the job learning.;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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