Comparative Advantage, Relative Wages, and the Accumulation of Human Capital

Posted: 29 Mar 2005

See all articles by Coen N. Teulings

Coen N. Teulings

University of Amsterdam; University of Cambridge

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Abstract

I apply Ricardo's principle of comparative advantage for a theory of factor substitutability in a model with a continuum of worker and job types. Highly skilled workers have a comparative advantage in complex jobs. The model satisfies the distance-dependent elasticity of substitution (DIDES) characteristic: substitutability between types declines with their skill distance. I analyze changes in relative wages due to human capital accumulation. The concept of a complexity dispersion parameter or compression elasticity is introduced. Empirical studies suggest its value to be equal to two: a 1 percent increase in the stock of human capital reduces the Mincerian return by 2 percent.

Suggested Citation

Teulings, Coen N., Comparative Advantage, Relative Wages, and the Accumulation of Human Capital. Journal of Political Economy, Vol. 113, pp. 425-461, April 2005. Available at SSRN: https://ssrn.com/abstract=678870

Coen N. Teulings (Contact Author)

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

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