Trade and the Distribution of Human Capital

Bougheas, Spiros; Riezman , Raymond G.

doi:10.2139/ssrn.765104

Download This Paper

Open PDF in Browser

Add Paper to My Library

Trade and the Distribution of Human Capital

University of Nottingham Research Paper Series No. 2005/15

31 Pages Posted: 4 Aug 2005

See all articles by Spiros Bougheas

Spiros Bougheas

University of Nottingham - School of Economics

Aarhus University - Department of Economics and Business Economics; University of California, Santa Barbara (UCSB) - Department of Economics; University of Iowa - Henry B. Tippie College of Business - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); GEP; Aarhus University - School of Business and Social Sciences

There are 2 versions of this paper

Date Written: 2005

Abstract

We develop a two-country, two-sector model of trade where the only difference between the two countries is their distribution of human capital endowments. We show that even if the two countries have identical aggregate endowments the pattern of trade depends on the properties of the two human capital distributions. We also show that the two distributions of endowments also completely determine the effects of trade on income inequality. Then, we prove that there are long-term gains from trade if the marginal utility of income is constant or as long as losers are compensated by winners. Finally, we look at a simple majority voting model. It turns out depending on the distribution of human capital, autarky and free trade with and without compensation may be the outcome of majority voting.

Keywords: Patterns of Trade,Income Distribution,Welfare,Political Economy

JEL Classification: F1

Suggested Citation: Suggested Citation

Bougheas, Spiros and Riezman, Raymond G., Trade and the Distribution of Human Capital (2005). University of Nottingham Research Paper Series No. 2005/15, Available at SSRN: https://ssrn.com/abstract=765104 or http://dx.doi.org/10.2139/ssrn.765104