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Dynamic Trade, Education and Intergenerational Inequality

Han Yang

MPRA Paper from University Library of Munich, Germany

Abstract: 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)
Date: 2020-04
New Economics Papers: this item is included in nep-dge and nep-int
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