Trade, Human Capital and Labour Market Adjustment
Bond University - Department of Economics
University of Nottingham - School of Economics
University of Nottingham
University of Nottingham Research Paper No. 2006/03
This paper highlights the way in which workers of different age and ability are affected by trade liberalisation. A general-equilibrium model of trade and human-capital is constructed. Individuals differ not only in their endogenous education-level but also in their exogenous age. They can, at any point in their lives, skill-upgrade through (costly) schooling. Trade-adjustment is analyzed as a problem in investment-theory. We find that adjustment can take a long time and older-workers differ from younger-workers in the proportion of population negatively affected and severity of losses. Results suggest that trade-adjustment-assistance should focus on older-unskilled-workers in skilled-abundant-countries and younger-skilled-workers in unskilled-labour-abundant-countries.
Number of Pages in PDF File: 40
Keywords: International Trade, Factor Mobility, Labour market adjustment
JEL Classification: F11, F16, J31, J62
Date posted: February 28, 2006
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