Heterogeneous Human Capital, Growth and Trade
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Heterogeneous Human Capital, Growth and Trade
Cheng-Te LeeDept. of International Trade,
Chinese Cultural University, Taiwan
Deng-Shing HuangInstitute of Economics,
Academia Sinica, Taiwan
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1. Literatures/Motivations• The diversity of human capital can matter
for the POT and growth.• Diversity and Trade (Grossman & Maggie
2000AER, Grossman 2004JPE)– Labors with different talent– Industry-specific module of tasks-combination
• Conventional Industries (motor)// skill-clustering• Newly developed (software)// cross-matching
• Diversity and Growth (Das 2005)– Diversity speeds up growth
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1. Literatures/Motivations (cont.)• Diversity and Trade (Grossman & Maggie 2000AER, Grossman
2004JPE)– Labors with different talent– Industry-specific module of tasks-combination
• Conventional Industries (motor)// skill-clustering• Newly developed (software)// cross-matching
– Results: Diversity Comp. Adv in Cross-Matching goods (Diversity Eff.)
• Diversity and Growth (Das 2005)– Theory: Diversity speeds up growth (if R&D is cross-matching)– Evidence: Diverse HC not necessary High Growth (Not
consistent with the real world) – (Why? Communication gap higher if HC more diverse lower
growth// Das 2005)
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Real World Data
• Fact: For human capital, countries differ not only in diversity but also in Kurtosis
• Type 1: One of the countries has higher 95th/5th and higher 75th/25th than the other; for example, U.S.A. vs. Germany (denoted as DEU).
• Type 2: One of the pair countries has higher 95th/5th but lower 75th/25th than the other; for example, Canada vs. U.S.A.
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Human Capital Distribution
•
Prose Document Quantitative
Coun. 95th/5th 75th/25th Coun. 95th/5th 75th/25th Coun. 95th/5th 75th/25th
CAN 2.72 1.31 CAN 3.09 1.32 CAN 2.65 1.33
AUS 2.71 1.30 CHE 2.97 1.28 AUS 2.64 1.30
USA 2.58 1.34 USA 2.90 1.36 USA 2.62 1.35
CHE 2.29 1.27 AUS 2.77 1.29 CHE 2.48 1.25
BEL 2.27 1.30 UK 2.55 1.36 IRL 2.45 1.38
UK 2.26 1.34 IRL 2.38 1.36 UK 2.44 1.37
IRL 2.24 1.33 BEL 2.16 1.28 BEL 2.35 1.32
FIN 1.78 1.24 FIN 1.95 1.27 FIN 1.82 1.23
SWE 1.75 1.23 NOR 1.80 1.23 SWE 1.77 1.23
DEU 1.74 1.24 SWE 1.77 1.24 NLD 1.76 1.21
NLD 1.72 1.22 NLD 1.74 1.22 NOR 1.72 1.21
NOR 1.65 1.19 DEU 1.72 1.22 DEU 1.67 1.21
DNK 1.55 1.19 DNK 1.69 1.23 DNK 1.65 1.20
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Talent Distribution
mint
b
t2
t maxt
b2
1
b
b
2
2
t t
)(tb for Diversityεsmaller higher Kurtosis
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Talent Distribution
mint
b
t2
t maxt
b2
1
b
b
2
2
t t
)(tb for Diversityεsmaller higher Kurtosis
Type 1: More diverse/ lower Kurtosis
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Talent Distribution
mint
b
t2
t maxt
b2
1
b
b
2
2
t t
)(tb for Diversityεsmaller higher Kurtosis
Type 2: More Diverse and greater Kurtosis
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Types of Distribution Diff.
• Type 1: a country with more diverse human capital but with lower kurtosis than its pair country (in Grossman & Maggi (2000) Grossman (2004) and Das (2005))
• Type 2: a country with more diverse human capital and higher kurtosis than the others (not yet considered in the literature) 本文
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Correlation (HC Distribution, Growth Rate)
Prose Document Quantitative
Country 95th/5th* 75th/25th**
Country 95th/5th* 75th/25th**
Country 95th/5th* 75th/25th**
CAN 2.72 1.31 CAN 3.09 1.32 CAN 2.65 1.33
AUS 2.71 1.30 CHE 2.97 1.28 AUS 2.64 1.30
USA 2.58 1.34 USA 2.90 1.36 USA 2.62 1.35
CHE 2.29 1.27 AUS 2.77 1.29 CHE 2.48 1.25
BEL 2.27 1.30 UK 2.55 1.36 IRL 2.45 1.38
UK 2.26 1.34 IRL 2.38 1.36 UK 2.44 1.37
IRL 2.24 1.33 BEL 2.16 1.28 BEL 2.35 1.32
FIN 1.78 1.24 FIN 1.95 1.27 FIN 1.82 1.23
SWE 1.75 1.23 NOR 1.80 1.23 SWE 1.77 1.23
DEU 1.74 1.24 SWE 1.77 1.24 NLD 1.76 1.21
NLD 1.72 1.22 NLD 1.74 1.22 NOR 1.72 1.21
NOR 1.65 1.19 DEU 1.72 1.22 DEU 1.67 1.21
DNK 1.55 1.19 DNK 1.69 1.23 DNK 1.65 1.20
Corr 0.07 -0.13 Corr 0.17 -0.15 Corr 0.09 -0.05
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Main Findings• Diversity Effect Diversity Comp. Adv. in Submodular (S-goods)
‧Pattern of Trade (more likely to Export S)
‧Growth (higher growth rate, if R&D is S-goods)
• Kurtosis Effect Kurtosis Comp. Adv. in Supermodular C-goods)
Opposite to the Diversity Effects
Theme: Kurtosis difference why an more diversity economy may have lower growth rate. (Explain the discrepancy between theoretical results and empirical observations.)
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2. Model
• A small-open economy • Labor with hetero talent symmetric distribution
• 2 sectors (C&S) / 2 tasks Yi=η Fi (tx, tv) – Consumption sector C supermodular
(skill-clustering : employing identical-skill workers)
– R&D sector S submodular
( Cross-matching: most- least-talented)
}t,tmin{)t,t(F vxvxC
}t,tmax{)t,t(F vxvxS
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Model (cont.) Talent Dist.
,otherwise,0
],t,2
t[tif,b2
1
),2
t,2
t[tif,b2
b
),2
t,t[tif,b2
1
)t(
max
min
2min
btt
2max
btt
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Talent Distribution
mint
b
t2
t maxt
b2
1
b
b
2
2
t t
)(tb for Diversityεsmaller higher Kurtosis
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Talent Dist. & Employment
mint
b
t2
t maxt
b2
1
b
b
2
2
t t
)(tC employs labor with t around average of S employs labor of most- and least-talented
t
Approach:• Given t^ m(t^)• yc and ys solved• PPF Yc=f(Ys)• Given P=Pc/Ps• MRT= Pc/Ps• Yc/Ys• Export function• Growth rate
t̂ )ˆ(tmC sector
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Case 1:
mint
b
t2
t maxt
b2
1
b
b
2
2
t t
)(tC employs labor with t around average of S employs labor of most- and least-talented
t
t̂ )ˆ(tmC sector
2/ˆmin ttt
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Case 2
mint
b
t2
t maxt
b2
1
b
b
2
2
t t
)(tC employs labor with t around average of S employs labor of most- and least-talented
t
t̂ )ˆ(tmC sector
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Case 1:
S S
mint
b
t 2
t maxt
b2
1
b
b
2
2
t t
)(t
)ˆ(tmt̂
C CCC
2/ˆmin ttt
C employs labor with t around average of (t)S employs labor of most- and least-talented
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Case 1: 2/ˆmin ttt
)ˆ(
ˆ)ˆ22(
4)(),(
tm
tCC ttb
b
tdttttFy
)ˆ32
)(ˆ2(
4)()](,[
ˆ
min
ttb
ttb
bdtttmtFy
t
tSS
Assume: income-tax τand fully funds the new blueprints (S)
S
C
demand y
y
p
)1(
1
tt
t
ty
ty
y
y
S
C
S
C
ˆ2ˆ/
ˆ/
.
MRT
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Case I (cont.)
• The export function of good S:
• (6)
• The growth rate:
• (7)
)1()]2/(1[2
)]2/(1[),,,(
22
p
tbp
ptbRDRStbp
])2
1[(4
222
pt
b
b
tg
Only b affects the growth rate.Kurtosis has no effect at all.// conventional results
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Case II: Labor division for C-sector & S-sector
1. Given t^ m(t^)2. yc and ys solved3. Export function4. Growth rate
S S
mint
b
t 2
t maxt
b2
1
b
b
2
2
t t
)(t
)ˆ(tmt̂
S SCC
ttt ˆ2/
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Case II (Cont.)• The export function of good S:
• (11)
• The growth rate:
• (12)
)1()1(2
),,(),,,,(
22
p
p
ptbtbp
]),,([4
)( 222
ptbb
tbg
5.02
])(4
)8(1[),,(
bt
btbtb 2),,(
21 tb
t
Both b and ε matters for growth rate.
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3. More Diverse and Higher Kurtosis Talent Distribution
0 ddb
t t
)(t
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More Diverse, Higher Kurtosis, POT and Growth
• Case Ι:
– POT
(14)
– Growth
(15)
tbptttt 2/12/12/ˆmin
0
dbb
ddbb
d
0
dbb
gd
gdb
b
gdg
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More Diverse, Higher Kurtosis, POT and Growth
• Case II:
– POT
(16)
– Growth
(17)
tpttt 2/11ˆ2/
0)(
dbb
ddbb
d
0)(
dbg
b
gd
gdb
b
gdg
Higher b and Kurtosis (lower ε) Lower Growth rate.
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4. Concluding Remarks
• More diverse and higher kurtosis talent distribution leads to change in POT and lower growth rate. (Case II)
• Kurtosis Effect dominates the diversity effect.
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