Human capital formation in an open economy with increasing wage differentials

Alessandro Turrini

No 1997007, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: Several developed countries are witnessing a trend towards an increasing gap in the earnings between skilled and unskilled workers. Though it is widely recognised that human capital formation programs through education and training should be strengthened in the presence of increasing wage differentials, it seems that this is not currently occurring to a satisfactory extent. We show an example where technology and terms of trade shocks that enhance the wage differential between high and low-skilled labour aggravate the underinvestment in public education arising from majority voting, thus leading to an undesirable outcome, both in terms of efficiency and equity.

Keywords: wage differentials; human capital; international trade; political economy (search for similar items in EconPapers)
JEL-codes: D72 F10 H52 J31 (search for similar items in EconPapers)
Date: 1997-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:1997007

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