Economic underdevelopment: The case of a missing market for human capital

This paper demonstrates that the coexistence of developed and underdeveloped countries can be a stationary equilibrium in a world economy with free trade in consumption goods and physical capital. An underdeveloped country is characterized by a high ratio of unskilled workers in the labor force, a s...

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Bibliographic Details
Published inJournal of development economics Vol. 40; no. 2; pp. 219 - 239
Main Author Ljungqvist, Lars
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.04.1993
Elsevier
North-Holland Pub. Co
Elsevier Sequoia S.A
SeriesJournal of Development Economics
Subjects
Consumption
Developing countries
Economic development
Economic models
Economic theory
Free trade
Global economy
GNP
Gross National Product
Human capital
Human resources
Industrialized nations
International trade
Labor force
LDCs
Market equilibrium
Underdevelopment
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Summary:This paper demonstrates that the coexistence of developed and underdeveloped countries can be a stationary equilibrium in a world economy with free trade in consumption goods and physical capital. An underdeveloped country is characterized by a high ratio of unskilled workers in the labor force, a small stock of physical capital, a low gross national product, a high rate of return on human capital and a corresponding large wage differential between skilled and unskilled workers. The critical assumptions are that future labor earnings cannot serve as collateral on a loan and indivisibilities in education.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0304-3878
1872-6089
DOI:10.1016/0304-3878(93)90084-Z