Mr. Rodolfo Luzio, Mr. Steven V Dunaway, and Mr. Martin D Kaufman
This paper presents a simple framework that illustrates the link between skill-based wage differentiation and human capital acquisition given skill-biased technical progress. The analysis points to the economic costs resulting from labor market and income redistribution policies that prevent the skill premium from playing its role in fostering human capital accumulation and the adoption of new technologies. The study compares key economic indicators among Canada, France, Germany, the United Kingdom, and the United States. Differences in wage differen-tiation and investment in new technologies among these countries could be related to policies affecting labor markets; such practices may reflect social choices.
This paper presents a multisector growth model where education enhances general human capital, which is essential for increasing or maintaining the mobility of workers across industries. The paper shows that education, combined with international trade, can affect growth positively in the long run by raising workers’ ability to adapt and move easily to industries with the greatest productivity in each period. Depending on the initial ratio of general-to-specific human capital stock, multiple equilibrium growth paths can exist, including a poverty trap. If the ratio is not substantially low, trade liberalization can allow an economy in a poverty trap to transform into one with continuous education and higher output growth.