Working Paper: NBER ID: w12411
Authors: Tatyana Chesnokova; Kala Krishna
Abstract: 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.
Keywords: Skill Acquisition; Credit Constraints; Trade
JEL Codes: F16; O15; O16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| absence of credit markets (E44) | inability to acquire skills (G53) |
| pay-as-you-go system (H55) | ability to acquire skills (J24) |
| weaker credit constraints (E51) | increased availability of skilled labor (J24) |
| increased availability of skilled labor (J24) | affects supply of skill-intensive goods (F66) |
| trade liberalization (F13) | potential reduction in welfare (D69) |
| binding credit constraints (E51) | exacerbate inequalities (I24) |
| distribution of wealth (D31) | determines outcomes (D87) |