DP6678 Trading Population for Productivity: Theory and Evidence

Author(s): Oded Galor , Andrew Mountford

Publication Date: February 2008

Keyword(s): Demographic Transition , Growth , Human Capital , International Trade

JEL(s): F11 , F43 , J10 , N30 , O40

Programme Areas: International Trade and Regional Economics

Link to this Page: www.cepr.org/pubs/dps/DP6678.asp.asp

This research argues that the differential effect of international trade on the demand for human capital across countries has been a major determinant of the distribution of income and population across the globe. In developed countries the gains from trade have been directed towards investment in education and growth in income per capita, whereas a significant portion of these gains in less developed economies have been channelled towards population growth. Cross-country regressions establish that indeed trade has positive effects on fertility and negative effects on education in non-OECD economies, while inducing fertility decline and human capital formation in OECD economies.