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Trade, Human Capital and Labour Market Adjustment

University of Nottingham Research Paper No. 2006/03

40 Pages Posted: 28 Feb 2006  

Rod Falvey

Bond University - Department of Economics

David Greenaway

University of Nottingham - School of Economics

Joana Silva

University of Nottingham

Date Written: February 2006

Abstract

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.

Keywords: International Trade, Factor Mobility, Labour market adjustment

JEL Classification: F11, F16, J31, J62

Suggested Citation

Falvey, Rod and Greenaway, David and Silva, Joana, Trade, Human Capital and Labour Market Adjustment (February 2006). University of Nottingham Research Paper No. 2006/03. Available at SSRN: https://ssrn.com/abstract=885923 or http://dx.doi.org/10.2139/ssrn.885923

Rod Falvey (Contact Author)

Bond University - Department of Economics ( email )

Bond University - Department of Economics
Gold Coast, Queensland 4229
Australia

David Greenaway

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom
+44 115 951 5469 (Phone)
+44 115 951 4159 (Fax)

Joana Silva

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

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