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Distance, skill deepening and development: will peripheral countries ever get rich?

Redding, Stephen and Schott, Peter K. (2003) Distance, skill deepening and development: will peripheral countries ever get rich? 572. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

This paper models the relationship between countries’ distance from global economic activity, endogenous investments in education, and economic development. Firms in remote locations pay greater trade costs on both exports and intermediate imports, reducing the amount of value added left to remunerate domestic factors of production. If skill- intensive sectors have higher trade costs, more pervasive input-output linkages, or stronger increasing returns to scale, we show theoretically that remoteness depresses the skill premium and therefore incentives for human capital accumulation. Empirically, we exploit structural relationships from the model to demonstrate that countries with lower market access have lower levels of educational attainment. We also show that the world’s most peripheral countries are becoming increasingly economically remote over time.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2003 Stephen Redding and Peter. K. Schott
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: F - International Economics > F1 - Trade > F14 - Country and Industry Studies of Trade
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O10 - General
F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 572
Date Deposited: 05 Mar 2008 10:10
URL: http://eprints.lse.ac.uk/3703/

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