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

43 Pages Posted: 4 Mar 2003

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

Multiple version iconThere are 2 versions of this paper

Date Written: February 2003

Abstract

Do workers in countries located far from global economic activity have lower incentives to accumulate human capital than workers near the centre? 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 their exports and their imports of intermediate inputs, reducing the amount of value added left to remunerate domestic factors of production. As a result, the skill premium and incentives to accumulate human capital will be depressed if skill-intensive sectors have higher trade costs, more pervasive input-output linkages, or stronger increasing returns to scale. Empirically, we exploit structural relationships from the model to demonstrate that countries with lower market access have lower levels of educational attainment and that the world's most peripheral countries are becoming increasingly remote over time.

Keywords: Economic geography, international inequality, international trade

JEL Classification: F12, F14, O10

Suggested Citation

Redding, Stephen J. and Schott, Peter K., Distance, Skill Deepening and Development: Will Peripheral Countries Ever Get Rich? (February 2003). Available at SSRN: https://ssrn.com/abstract=384961

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 )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-436-4260 (Phone)
203-436-6974 (Fax)

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

National Bureau of Economic Research (NBER)

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Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

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