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Optimal Educational Policies and Comparative Advantage

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  • 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, "undated". "Optimal Educational Policies and Comparative Advantage," Discussion Papers 09/02, University of Nottingham, GEP.
    • Handle: RePEc:not:notgep:09/02
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    References listed on IDEAS

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    1. Giovanni Maggi & Gene M. Grossman, 2000. "Diversity and Trade," American Economic Review, American Economic Association, vol. 90(5), pages 1255-1275, December.
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    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. Hartmut Egger & Peter Egger & Josef Falkinger & Volker Grossmann, 2005. "International Capital Market Integration, Educational Choice and Economic Growth," CESifo Working Paper Series 1630, CESifo Group Munich.
    7. 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.
    8. 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.
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    Cited by:

    1. Michael Funke & Marc Gronwald, 2009. "A Convex Hull Approach to Counterfactual Analysis of Trade Openness and Growth," CESifo Working Paper Series 2692, CESifo Group Munich.
    2. repec:eee:inecon:v:109:y:2017:i:c:p:102-115 is not listed on IDEAS
    3. 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, pages 1251-1280, November.
    4. Davidson, Carl & Sly, Nicholas, 2014. "A simple model of globalization, schooling and skill acquisition," European Economic Review, Elsevier, vol. 71(C), pages 209-227.
    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.

    More about this item

    Keywords

    Patterns of Trade; Education Policy; Welfare;

    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

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