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

Stephen Redding and Peter Schott

No 9447, NBER Working Papers from National Bureau of Economic Research, Inc

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 remote over time.

JEL-codes: F12 F14 (search for similar items in EconPapers)
Date: 2003-01
New Economics Papers: this item is included in nep-dev and nep-lam
Note: ITI
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Citations: View citations in EconPapers (115)

Published as Redding, Stephen and Peter K. Schott. "Distance, Skill Deepening And Development: Will Peripheral Countries Ever Get Rich?," Journal of Development Economics, 2003, v72(2,Dec), 515-541.

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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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