Dynamic Trade, Education and Intergenerational Inequality
MPRA Paper from University Library of Munich, Germany
How does international trade affect transitional dynamics of the relative wage for unskilled workers when educational decisions and capital accumulation are considered? By including these channels in a dynamic quantitative trade model, I show that reduced trade costs increase the skill premium and educational attainment in the steady state. On the transitional path, capital accumulation and capital-skill complementarity cause a more drastic increase in the skill premium in the earlier transition. In the long run, education mitigates 65% of transitory trade-induced inequality on average. This result explains the observed transitional paths of the skill premium in recent trade liberalization episodes.
Keywords: international trade; dynamic; education; inequality; skill premium (search for similar items in EconPapers)
JEL-codes: F1 F4 F6 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-int
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