Skill Acquisition, Credit Constraints, and Trade
39 Pages Posted: 29 Sep 2006 Last revised: 31 May 2021
Date Written: August 2006
This paper looks at the effect of credit constraints on skill acquisition when agents have heterogeneous abilities and wealth. We use a two factor general equilibrium model and assume credit markets are absent. We explore the effects of trade on factor earnings as well as the evolution of the distribution of income in small and large economies. Our work suggests that developed countries need to ensure access to education when liberalizing trade to ensure they reap the potential gains from trade.
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