Journal of Political Economy Vol. 113 No. 2 2005
Comparative Advantage, Relative Wages, and the Accumulation of Human Capital
Abstract
I apply Ricardo’s principle of comparative advantage to a theory of factor substitutability in a model with a continuum of worker and job types. Highly skilled workers have a comparative advantage in complex jobs. The model satisfies the distance‐dependent elasticity of substitution (DIDES) characteristic: substitutability between types declines with their skill distance. I analyze changes in relative wages due to human capital accumulation. The concept of a complexity dispersion parameter or compression elasticity is introduced. Empirical studies suggest its value to be equal to two: a 1 percent increase in the stock of human capital reduces the Mincerian return by 2 percent.
- DOI
- 10.1086/427467
- Volume
- 113
- Issue
- 2
- Pages
- 425-461
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref