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Comparative Advantage, Relative Wages, and the Accumulation of Human Capital

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  • Coen N. Teulings

    () (University of Amsterdam)

Abstract

I apply Ricardo’s principle of comparative advantage to a theory of factor substitutability in a model with a continuum of worker and job types. Highly skilled workers have a comparative advantage in complex jobs. The model satisfies the distance‐dependent elasticity of substitution (DIDES) characteristic: substitutability between types declines with their skill distance. I analyze changes in relative wages due to human capital accumulation. The concept of a complexity dispersion parameter or compression elasticity is introduced. Empirical studies suggest its value to be equal to two: a 1 percent increase in the stock of human capital reduces the Mincerian return by 2 percent. See the publication in Journal of Political Economy , 2005, 113(2), 425-461.

Suggested Citation

  • Coen N. Teulings, 2002. "Comparative Advantage, Relative Wages, and the Accumulation of Human Capital," Tinbergen Institute Discussion Papers 02-081/3, Tinbergen Institute, revised 08 Apr 2005.
  • Handle: RePEc:tin:wpaper:20020081
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    References listed on IDEAS

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    1. James Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explanations With A Dynamic General Equilibrium Model of Labor Earnings With Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 1-58, January.
    2. Teulings, Coen N, 1995. "The Wage Distribution in a Model of the Assignment of Skills to Jobs," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 280-315, April.
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    Cited by:

    1. Pieter A. Gautier & Coen N. Teulings, 2006. "How Large are Search Frictions?," Journal of the European Economic Association, MIT Press, vol. 4(6), pages 1193-1225, December.
    2. Pieter A. Gautier & Coen N. Teulings, 2015. "Sorting And The Output Loss Due To Search Frictions," Journal of the European Economic Association, European Economic Association, vol. 13(6), pages 1136-1166, December.
    3. Gregory Kurtzon, 2013. "Occupational Choice and the E¤ects of Skill Supply on Relative Wages," Working Papers 460, U.S. Bureau of Labor Statistics.

    More about this item

    Keywords

    assignment; wage distribution; human capital.;

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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