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

41 Pages Posted: 16 Jan 2003 Last revised: 26 Oct 2022

See all articles by Stephen J. Redding

Stephen J. Redding

Princeton University

Peter K. Schott

Yale University - School of Management; National Bureau of Economic Research (NBER); Yale University - Cowles Foundation

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Date Written: January 2003

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.

Suggested Citation

Redding, Stephen J. and Schott, Peter K., Distance, Skill Deepening and Development: Will Peripheral Countries Ever Get Rich? (January 2003). NBER Working Paper No. w9447, Available at SSRN: https://ssrn.com/abstract=370431

Stephen J. Redding

Princeton University ( email )

Princeton, NJ 08544-1021
United States

HOME PAGE: http://www.princeton.edu/~reddings/

Peter K. Schott (Contact Author)

Yale University - School of Management ( email )

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HOME PAGE: http://www.som.yale.edu/faculty/pks4

National Bureau of Economic Research (NBER)

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Yale University - Cowles Foundation

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