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Trade and the Distribution of Human Capital

33 Pages Posted: 8 Sep 2009  

Raymond G. Riezman

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

Spiros Bougheas

University of Nottingham - School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: June 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 human capital 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 from trade 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

Riezman , Raymond G. and Bougheas, Spiros, Trade and the Distribution of Human Capital (June 2005). CESifo Working Paper No. 1475. Available at SSRN: https://ssrn.com/abstract=747124

Raymond G. Riezman (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

University of Iowa - Henry B. Tippie College of Business - Department of Economics ( email )

316 PBB
Iowa City, IA 52242
United States

HOME PAGE: http://www.biz.uiowa.edu/faculty/rriezman/

University of California, Santa Barbara - Department of Economics ( email )

2127 North Hall
Santa Barbara, CA 93106
United States

University of Aarhus - Department of Economics and Business ( email )

Fuglesangs Alle 4
Aarus, 8210
Denmark

HOME PAGE: http://www.biz.uiowa.edu/faculty/rriezman/

GEP ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

Spiros Bougheas

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

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