Comparative Advantage, Relative Wages, and the Accumulation of Human Capital

Coen N. Teulings ()
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Coen N. Teulings: University of Amsterdam

No 02-081/3, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: I apply Ricardo’s principle of comparative advantage to a theory of factor substitutability in a model with a continuum of worker and job types. Highly skilled workers have a comparative advantage in complex jobs. The model satisfies the distance‐dependent elasticity of substitution (DIDES) characteristic: substitutability between types declines with their skill distance. I analyze changes in relative wages due to human capital accumulation. The concept of a complexity dispersion parameter or compression elasticity is introduced. Empirical studies suggest its value to be equal to two: a 1 percent increase in the stock of human capital reduces the Mincerian return by 2 percent.

See the publication in Journal of Political Economy , 2005, 113(2), 425-461.

Keywords: assignment; wage distribution; human capital. (search for similar items in EconPapers)
JEL-codes: D30 J24 (search for similar items in EconPapers)
Date: 2002-08-14, Revised 2005-04-08
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Citations: View citations in EconPapers (33)

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