Galor and Moav (2004) argue that in the early stages of development, physical capital accumulation is the primary source of economic growth. Thus, inequality enhances growth by channeling resources towards individuals whose marginal propensity to save is higher. In later stages of development,...

The Heckscher-Ohlin model predicts that trade openness causes the skill premium to increase in skill-abundant developed countries, and to decrease in skill-scarce developing countries. Empirical evidence, however, shows that the skill premium declined in some developing countries, while others...