Distance, Skill Deepening and Development: Will Peripheral Countries Ever Get Rich?

Stephen Redding and Peter Schott

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: This paper models the relationship between countries' distance from global economic activity, endogenous investments in education, and economic development. Firms in remote locations pay greater trade costs on both exports and intermediate imports, reducing the amount of value added left to remunerate domestic factors of production. If skill- intensive sectors have higher trade costs, more pervasive input-output linkages, or stronger increasing returns to scale, we show theoretically that remoteness depresses the skill premium and therefore incentives for human capital accumulation. Empirically, we exploit structural relationships from the model to demonstrate that countries with lower market access have lower levels of educational attainment. We also show that the world's most peripheral countries are becoming increasingly economically remote over time.

Keywords: Economic Geography; Human Capital; International Inequality; International Trade (search for similar items in EconPapers)
JEL-codes: F12 F14 O10 (search for similar items in EconPapers)
Date: 2003-06
New Economics Papers: this item is included in nep-dev
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (115)

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Related works:
Journal Article: Distance, skill deepening and development: will peripheral countries ever get rich? (2003)
Working Paper: Distance, Skill Deepening and Development: Will Peripheral Countries Ever Get Rich? (2003)
Working Paper: Distance, skill deepening and development: will peripheral countries ever get rich? (2003)
Working Paper: Distance, skill deepening and development: will peripheral countries ever get rich? (2003)
Working Paper: Distance, Skill Deepening and Development: Will Peripheral Countries Ever Get Rich? (2003)
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