Dynamic Trade, Education and Intergenerational Inequality

Yang, Han (2020): Dynamic Trade, Education and Intergenerational Inequality.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: international trade, dynamic,education, inequality, skill premium
• Subjects: F - International Economics > F1 - Trade; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance; F - International Economics > F6 - Economic Impacts of Globalization

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