Skill Choice, Brain Drain, and Variety of Goods: Innovation in the Core Periphery Model

Abstract

People judge whether they want to be high-skilled workers by considering the economic returns and the effort required to skill. This study considers two regions: an advanced industrial region, where high-skilled workers increase the variety of goods through innovation, and an underdeveloped region where innovation does not occur. Here, workers become high-skilled, considering regions of origin and potential abilities. Numerical simulations show that the proportion of high-skilled workers reacts in an inverted U-shape, as the variety of goods increases. When the variety of goods is small, the ratio of high-skilled workers in the developed regions is higher than that in the underdeveloped regions; as it increases, the proportion of high-skilled workers born in both regions increase. The proportion of high-skilled workers born in developed regions eventually declines; however, it increases in the underdeveloped regions. As the variety of goods increases, the proportion of high-skilled workers decreases in the underdeveloped regions.