TY - JOUR
T1 - Trade liberalisation and human capital adjustment
AU - Falvey, Rod
AU - Greenaway, David
AU - Silva, Joana
N1 - Funding Information:
We are grateful to two anonymous Referees for detailed comments on a first draft and to Jonathan Eaton for his guidance through two revisions. We also thank participants at Royal Economic Society, Midwest International Economics, European Trade Study Group, European Economic Association, Otago International Trade Conferences and seminars at Bond University, Oxford University and the Universities of Liverpool, New South Wales, Nottingham and Porto. Helpful comments on earlier drafts were also received from Oscar Alfonso, Carl Davidson, Gerald Willmann, Peter Wright and Richard Upward. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors and do not necessarily represent the views of the World Bank. Falvey and Greenaway acknowledge financial support from the Leverhulme Trust under Programme Grant F/00 114/AM . Silva acknowledges financial support from the Fundação para a Ciência e a Tecnologia Grant SFRH/BD/13162/2003 and the Economic and Social Research Council Grant PTA-026-27-1258 .
Copyright:
Copyright 2010 Elsevier B.V., All rights reserved.
PY - 2010/7
Y1 - 2010/7
N2 - This paper highlights the way in which workers of different ages and abilities are affected by anticipated and unanticipated trade liberalisations. A two-factor (skilled and unskilled labour), two-sector Heckscher-Ohlin trade model is supplemented with an education sector which uses skilled labour and time to convert unskilled workers into skilled workers. A skilled worker's income depends on her ability, but all unskilled workers have the same income. Trade liberalisation in a relatively skilled labour abundant country increases the relative skilled wage and induces skill upgrading by the existing workforce, with younger and more able unskilled workers most likely to upgrade. But not all upgraders are better off as a result of the liberalisation. The older and less able upgraders are likely to lose. For an anticipated liberalisation we show that the preferred upgrading strategies depend on a worker's ability and that much of the upgrading will take place before the liberalisation. Hence some workers who would have upgraded had they anticipated the liberalisation will not if it is unanticipated, and adjustment assistance that applies only to post-liberalisation upgraders will fail to compensate some losers and distort the upgrading decisions of others.
AB - This paper highlights the way in which workers of different ages and abilities are affected by anticipated and unanticipated trade liberalisations. A two-factor (skilled and unskilled labour), two-sector Heckscher-Ohlin trade model is supplemented with an education sector which uses skilled labour and time to convert unskilled workers into skilled workers. A skilled worker's income depends on her ability, but all unskilled workers have the same income. Trade liberalisation in a relatively skilled labour abundant country increases the relative skilled wage and induces skill upgrading by the existing workforce, with younger and more able unskilled workers most likely to upgrade. But not all upgraders are better off as a result of the liberalisation. The older and less able upgraders are likely to lose. For an anticipated liberalisation we show that the preferred upgrading strategies depend on a worker's ability and that much of the upgrading will take place before the liberalisation. Hence some workers who would have upgraded had they anticipated the liberalisation will not if it is unanticipated, and adjustment assistance that applies only to post-liberalisation upgraders will fail to compensate some losers and distort the upgrading decisions of others.
KW - Labour market adjustment
KW - Skill acquisition
KW - Trade liberalisation
UR - http://www.scopus.com/inward/record.url?scp=77953613328&partnerID=8YFLogxK
U2 - 10.1016/j.jinteco.2010.04.003
DO - 10.1016/j.jinteco.2010.04.003
M3 - Article
AN - SCOPUS:77953613328
SN - 0022-1996
VL - 81
SP - 230
EP - 239
JO - Journal of International Economics
JF - Journal of International Economics
IS - 2
ER -