HUMAN CAPITAL DISTRIBUTION, GROWTH AND TRADE

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  • This paper has benefited from valuable suggestions of participants at the 2010 Taipei International Conference on Growth, Trade and Dynamics. We are grateful to the editor and the anonymous referees for useful comments on the earlier version of this paper. Any remaining errors are our responsibility.

ABSTRACT

Distribution differences in human capital matter for a country's growth and trade. While the existing literature considers only the diversity difference in talent distribution, we argue that the kurtosis difference is also an important factor. In a two-sector equilibrium growth model, where the production function is supermodular for the consumption-good sector and submodular for the R&D sector, we prove that the diversity effect and kurtosis effect are opposite to each other. A country endowed with more diverse but leptokurtic talent distribution may have lower growth rate and import submodular goods, opposite to the conventional result from considering only the diversity difference.

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