Impact of Capital Market Integration on Skilled-Unskilled Labor Choice

Masafumi Tsubuku () and Hikaru Ogawa
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Masafumi Tsubuku: Nagoya University, Postal: Furocho Chikusaku, Nagoya 464-8601, Japan

Journal of Economic Integration, 2017, vol. 32, issue 1, 90-111

Abstract: This study examines how capital market integration, induced by globalization, affects skilled-unskilled labor choices. Our results show that market integration fosters competition for mobile capital among countries, inducing governments to employ domestic policies that are favorable for skilled workers. These policy changes induce individuals to become skilled workers, thereby raising the skilled-unskilled labor ratio. We examine the efficiency of the aforementioned ratio in integrated markets and show that the supply of skilled (unskilled) labor in equilibrium is excessive (deficient) because education in one country might create negative externalities in others.

Keywords: Capital Tax Competition; Skilled Labor; Unskilled Labor; Market Integration (search for similar items in EconPapers)
JEL-codes: H21 H77 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0708

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