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GTAP Resource #1173

"Endogenous Comparative Advantages in Developing Economies"
by Lejour, Arjan, Guido van Steen and Hans Timmer

This paper focuses on endogenous comparative advantages in developing countries, in particular on
labour reallocation from low-productivity informal sectors into high-productivity formal sectors. This
mechanism is important for two reasons. First, it contributes to the growth potential of developing
countries and the absorption capacity for further capital accumulation. Second, labour reallocation
will keep developing economies specialized in low-skilled intensive products in the coming decades
and it will keep the wages of low-skilled workers low. We analyse this mechanism by simulating an
increase in the skill intensity of developing countries in the coming decades. These simulations are
carried out with WorldScan, a dynamic AGE model of the world economy. An increasing skill
intensity in LDCs will stimulate the global supply of high-skilled intensive products more than the
supply of low-skilled intensive products, but to a much lesser extent than one would expect in static
analyses or in absence of informal sectors.

Resource Details (Export Citation) GTAP Keywords
Category: GTAP Application
Status: Published
By/In: De Economist 148, p.205-231
Date: 2000
Created: Lejour, A. (2/6/2003)
Updated: Bacou, M. (6/30/2003)
Visits: 2,273
- Labor market issues

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