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

Raymond G. Riezman

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

Multiple version iconThere 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

Bougheas, Spiros and Riezman, Raymond G., Trade and the Distribution of Human Capital (2005). Available at SSRN: https://ssrn.com/abstract=765104 or http://dx.doi.org/10.2139/ssrn.765104

Spiros Bougheas (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

Raymond G. Riezman

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/

Aarhus University - Department of Economics and Business ( email )

Fuglesangs Alle 4
Aarus, 8210
Denmark

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

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

2127 North Hall
Santa Barbara, CA 93106
United States

GEP ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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

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