Trade, skill acquisition and distribution

The paper examines how international trade affects long-run distribution of wealth and income. Given a child's ability, the wage differential and the interest rate, a parent decides whether or not to educate the child and how much to borrow or lend. Trade, by affecting the wage differential, influences the interest rate, the proportion of population that acquires education and thereby income-wealth distribution. Two countries are distinguished by differences in educational infrastructure and loan market environments. The trade-pattern and the distributional implications of both sources of comparative advantage are similar. Free international mobility of loans may have different implications.