IDEAS home Printed from https://ideas.repec.org/p/not/notgep/09-02.html
   My bibliography  Save this paper

Optimal Educational Policies and Comparative Advantage

Author

Listed:
  • Spiros Bougheas
  • Richard Kneller
  • Raymond Riezman

Abstract

We consider the optimal education policies of a small economy whose government has a limited budget. Initially, the economy is closed and the government chooses its education policy to maximize welfare under autarky. Then the economy trades with the rest of the world. Lastly, the government chooses a new education policy that maximizes welfare under trade. Is it ever optimal for the government to choose its new policy so that it reverses the economy's comparative advantage? We find that if the budget stays fixed when it is optimal to `move up the skills chain' it is not feasible. In such a case a foreign loan is welfare imroving. A move in the opposite direction can be optimal and when it is optimal it is also feasible.

Suggested Citation

  • Spiros Bougheas & Richard Kneller & Raymond Riezman, 2009. "Optimal Educational Policies and Comparative Advantage," Discussion Papers 09/02, University of Nottingham, GEP.
    • Handle: RePEc:not:notgep:09/02
    as

    Download full text from publisher

    File URL: https://www.nottingham.ac.uk/gep/documents/papers/2009/09-02.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Giovanni Maggi & Gene M. Grossman, 2000. "Diversity and Trade," American Economic Review, American Economic Association, vol. 90(5), pages 1255-1275, December.
    2. Ngo Van Long & Raymond Riezman & Antoine Soubeyran, 2007. "Trade, Wage Gaps, and Specific Human Capital Accumulation," Review of International Economics, Wiley Blackwell, vol. 15(1), pages 75-92, February.
    3. Findlay, Ronald & Kierzkowski, Henryk, 1983. "International Trade and Human Capital: A Simple General Equilibrium Model," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 957-978, December.
    4. Hartmut Egger & Peter Egger & Josef Falkinger & Volker Grossmann, 2005. "International Capital Market Integration, Educational Choice and Economic Growth," CESifo Working Paper Series 1630, CESifo.
    5. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-563, July.
    6. Jaume Ventura, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(1), pages 57-84.
    7. Spiros Bougheas & Raymond Riezman, 2013. "Trade and the distribution of human capital," World Scientific Book Chapters, in: Raymond Riezman (ed.), International Trade Agreements and Political Economy, chapter 20, pages 395-407, World Scientific Publishing Co. Pte. Ltd..
    8. Carl Davidson & Steven J. Matusz, 2006. "Trade Liberalization And Compensation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 723-747, August.
    9. Eric W. Bond & Kathleen Trask & Ping Wang, 2003. "Factor Accumulation and Trade: Dynamic Comparative Advantage with Endogenous Physical and Human Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 1041-1060, August.
    10. Gene M. Grossman, 2004. "The Distribution of Talent and the Pattern and Consequences of International Trade," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 209-239, February.
    11. Jota Ishikawa, 1996. "Scale Economies in Factor Supplies: International Trade, and Migration," Canadian Journal of Economics, Canadian Economics Association, vol. 29(3), pages 573-594, August.
    12. Hartog,Joop & Maassen van den Brink,Henriëtte (ed.), 2007. "Human Capital," Cambridge Books, Cambridge University Press, number 9780521873161, September.
    13. Redding, Stephen, 1999. "Dynamic Comparative Advantage and the Welfare Effects of Trade," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 15-39, January.
    14. Eckhard Janeba, 2000. "Trade, Income Inequality, and Government Policies: Redistribution of Income or Education Subsidies?," NBER Working Papers 7485, National Bureau of Economic Research, Inc.
    15. Cartiglia, Filippo, 1997. "Credit constraints and human capital accumulation in the open economy," Journal of International Economics, Elsevier, vol. 43(1-2), pages 221-236, August.
    16. Ranjan, Priya, 2001. "Dynamic evolution of income distribution and credit-constrained human capital investment in open economies," Journal of International Economics, Elsevier, vol. 55(2), pages 329-358, December.
    17. Eckhard Janeba, 2003. "Does Trade Increase Inequality when Skills are Endogenous?," Review of International Economics, Wiley Blackwell, vol. 11(5), pages 885-898, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andrea Moro & Peter Norman, 2019. "Endogenous Comparative Advantage," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(3), pages 1088-1124, July.
    2. Chatterjee, Arpita, 2017. "Endogenous comparative advantage, gains from trade and symmetry-breaking," Journal of International Economics, Elsevier, vol. 109(C), pages 102-115.
    3. Egger, Hartmut & Fischer, Christian, 2020. "Increasing resistance to globalization: The role of trade in tasks," European Economic Review, Elsevier, vol. 126(C).
    4. Pao-Li Chang & Fali Huang, 2010. "Trade and Divergence in Education Systems," Working Papers 33-2010, Singapore Management University, School of Economics.
    5. Hartmut Egger & Peter Egger & Josef Falkinger & Volker Grossmann, 2010. "The Impact of Capital Market Integration on Educational Choice and the Consequences for Economic Growth," The World Economy, Wiley Blackwell, vol. 33(10), pages 1241-1268, October.
    6. Michael Funke & Marc Gronwald, 2009. "A Convex Hull Approach to Counterfactual Analysis of Trade Openness and Growth," CESifo Working Paper Series 2692, CESifo.
    7. Davidson, Carl & Sly, Nicholas, 2014. "A simple model of globalization, schooling and skill acquisition," European Economic Review, Elsevier, vol. 71(C), pages 209-227.
    8. Evgenia Tonkova & Sevdalina Hristova & Dancho Petrov, 2020. "Comparative Advantages in Attracting Investments - Contemporary View," Izvestia Journal of the Union of Scientists - Varna. Economic Sciences Series, Union of Scientists - Varna, Economic Sciences Section, vol. 9(3), pages 12-18, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pao-Li Chang & Fali Huang, 2010. "Trade and Divergence in Education Systems," Working Papers 33-2010, Singapore Management University, School of Economics.
    2. Nathalie Chusseau & Joel Hellier, 2014. "Globalization and social segmentation," Working Papers 339, ECINEQ, Society for the Study of Economic Inequality.
    3. Spiros Bougheas & Raymond Riezman, 2013. "Trade and the distribution of human capital," World Scientific Book Chapters, in: Raymond Riezman (ed.), International Trade Agreements and Political Economy, chapter 20, pages 395-407, World Scientific Publishing Co. Pte. Ltd..
    4. Harris, Richard G. & Robertson, Peter E., 2013. "Trade, wages and skill accumulation in the emerging giants," Journal of International Economics, Elsevier, vol. 89(2), pages 407-421.
    5. Egger, Hartmut & Fischer, Christian, 2020. "Increasing resistance to globalization: The role of trade in tasks," European Economic Review, Elsevier, vol. 126(C).
    6. Pao‐Li Chang & Fali Huang, 2014. "Trade And Divergence In Education Systems," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(4), pages 1251-1280, November.
    7. Andrea Moro & Peter Norman, 2019. "Endogenous Comparative Advantage," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(3), pages 1088-1124, July.
    8. Hartmut Egger & Peter Egger & Josef Falkinger & Volker Grossmann, 2010. "The Impact of Capital Market Integration on Educational Choice and the Consequences for Economic Growth," The World Economy, Wiley Blackwell, vol. 33(10), pages 1241-1268, October.
    9. Ranjan, Priya, 2003. "Trade induced convergence through human capital accumulation in credit-constrained economies," Journal of Development Economics, Elsevier, vol. 72(1), pages 139-162, October.
    10. Spiros Bougheas & Douglas R. Nelson, 2012. "Skilled Worker Migration and Trade: Inequality and Welfare," The World Economy, Wiley Blackwell, vol. 35(2), pages 197-215, February.
    11. Sampson, Thomas, 2016. "Assignment reversals: Trade, skill allocation and wage inequality," Journal of Economic Theory, Elsevier, vol. 163(C), pages 365-409.
    12. Saccone Donatella, 2008. "Economic openness, skill demand and skill supply in three archetypes of developing countries: a theoretical and empirical investigation," Department of Economics and Statistics Cognetti de Martiis. Working Papers 200813, University of Turin.
    13. Dessy, Sylvain & Mbiekop, Flaubert & Pallage, Stéphane, 2010. "On the mechanics of trade-induced structural transformation," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 251-264, March.
    14. Nils Herger, 2015. "An uncovered interest parity condition that worked - The continental investment demand for London bills of exchange during the gold standard (1880 -1914)," Working Papers 15.04, Swiss National Bank, Study Center Gerzensee.
    15. Liu, Runjuan & Trefler, Daniel, 2019. "A sorted tale of globalization: White collar jobs and the rise of service offshoring," Journal of International Economics, Elsevier, vol. 118(C), pages 105-122.
    16. Lutz Arnold, 2007. "A generalized multi-country endogenous growth model," International Economics and Economic Policy, Springer, vol. 4(1), pages 61-100, April.
    17. Roberto Bonfatti & Maitreesh Ghatak, 2010. "Trade and the Skill Premium Puzzle with Capital Market Imperfections," STICERD - Economic Organisation and Public Policy Discussion Papers Series 020, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    18. Asuyama, Yoko, 2012. "Skill Distribution and Comparative Advantage: A Comparison of China and India," World Development, Elsevier, vol. 40(5), pages 956-969.
    19. Spiros Bougheas & Rod Falvey, 2009. "The impact of financial market imperfections on trade and capital flows," EconoQuantum, Revista de Economia y Finanzas, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 6(1), pages 91-110, Julio - D.
    20. Bonfatti, Roberto & Ghatak, Maitreesh, 2013. "Trade and the allocation of talent with capital market imperfections," Journal of International Economics, Elsevier, vol. 89(1), pages 187-201.

    More about this item

    Keywords

    Patterns of Trade; Education Policy; Welfare;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:not:notgep:09/02. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Hilary Hughes (email available below). General contact details of provider: https://edirc.repec.org/data/cgnotuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.