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Journal of Economic Integration 2017 March;32(1) :90-111.
DOI: https://doi.org/10.11130/jei.2017.32.1.90
Impact of Capital Market Integration on Skilled-Unskilled Labor Choice
Hikaru Ogawa and 
Masafumi Tsubuku 
University of Tokyo, Tokyo, Japan
Nagoya University, Nagoya, Japan
Corresponding Author: Masafumi Tsubuku ,Tel: +81527894926, Fax: +81527894924, Email: msfm.tbk@gmail.com
Copyright ©2017 Journal of Economic Integration
ABSTRACT
This study examines how capital market integration, induced by globalization, affects skilled-unskilled labor choices. Our results show that market integration fosters competition for mobile capital among countries, inducing governments to employ domestic policies that are favorable for skilled workers. These policy changes induce individuals to become skilled workers, thereby raising the skilled-unskilled labor ratio. We examine the efficiency of the aforementioned ratio in integrated markets and show that the supply of skilled (unskilled) labor in equilibrium is excessive (deficient) because education in one country might create negative externalities in others.

JEL Classification
H21: Efficiency; Optimal Taxation
H77: Intergovernmental Relations; Federalism; Secession
Keywords: Capital Tax Competition | Skilled Labor | Unskilled Labor | Market Integration
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