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Trade and Divergence in Education Systems

Listed author(s):
  • Pao-Li Chang

    ()

    (Singapore Management University, School of Economics)

  • Fali Huang

    ()

    (Singapore Management University, School of Economics)

This paper presents a theory on the endogenous choice of a country's education policy and the two-way causal relationship between trade and education systems. The setting of a country's education system determines its talent distribution and comparative advantage in trade; the possibility of trade by raising the returns to the sector of comparative advantage in turn induces countries to further differentiate their education systems and reinforces the initial pattern of comparative advantage. Specifically, the Nash equilibrium choice of education systems by two countries interacting strategically are necessarily more divergent than their autarky choices, although the difference is still less than what is socially optimal for the world. We provide some preliminary empirical evidence on the relationship between education system and talent distribution.

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Paper provided by Singapore Management University, School of Economics in its series Working Papers with number 32-2012.

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Length: 51 pages
Date of creation: Sep 2012
Publication status: Published in SMU Economics and Statistics Working Paper Series
Handle: RePEc:siu:wpaper:32-2012
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