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Trade Liberalization and Human Capital Investment: 20 Years of Evidence from Vietnam

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  • Manh-Duc Doan

    (Development and Policies Research Center (DEPOCEN), Suite 305 - 307, 12 Trang Thi Street, Hoan Kiem, Hanoi)

Abstract

Exploiting a quasi-natural experiment–the Vietnam-U.S. Bilateral Trade Agreement (BTA)–I investigate the impact of trade liberalization on children's human capital investment in Vietnam. Using regional variation in export tariff uncertainty due to the BTA, I find that children in provinces more exposed to tariff reductions were more likely to engage in work rather than attend school, and this effect persisted for 20 years after the BTA. Additionally, the effects were more pronounced among boys, older children, rural children, and those with less-educated parents. These negative effects are driven by the increase in job opportunities, i.e., the child labor incidence, and the wage premium in the higher exposure provinces. The findings indicate that trade liberalization has increased the opportunity cost of education. These results remain robust across various alternative estimations.

Suggested Citation

  • Manh-Duc Doan, 2025. "Trade Liberalization and Human Capital Investment: 20 Years of Evidence from Vietnam," Working Papers 197, Development and Policies Research Center (DEPOCEN), Vietnam.
    • Handle: RePEc:dpc:wpaper:0197
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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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