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Trade and Divergence in Education Systems

  • 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
Date of revision:
Publication status: Published in SMU Economics and Statistics Working Paper Series
Handle: RePEc:siu:wpaper:32-2012
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  1. Checchi, Daniele & Fiorio, Carlo V. & Leonardi, Marco, 2013. "Intergenerational persistence of educational attainment in Italy," Economics Letters, Elsevier, vol. 118(1), pages 229-232.
  2. Eric A. Hanushek & Ludger Woessmann, 2010. "The Economics of International Differences in Educational Achievement," CESifo Working Paper Series 3037, CESifo Group Munich.
  3. Sauro Mocetti, 2012. "Educational choices and the selection process: before and after compulsory schooling," Education Economics, Taylor & Francis Journals, vol. 20(2), pages 189-209, February.
  4. Gene M. Grossman & Giovanni Maggi, 1998. "Diversity and Trade," NBER Working Papers 6741, National Bureau of Economic Research, Inc.
  5. Spiros Bougheas & Richard Kneller & Raymond Riezman, 2009. "Optimal Education Policies and Comparative Advantage," CESifo Working Paper Series 2631, CESifo Group Munich.
  6. 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, 08.
  7. Josef Falkinger & Volker Grossmann, 2004. "Institutions and Development: The Interaction between Trade Regime and Political System," CESifo Working Paper Series 1279, CESifo Group Munich.
  8. 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.
  9. Eric A. Hanushek, 2002. "The Long Run Importance of School Quality," NBER Working Papers 9071, National Bureau of Economic Research, Inc.
  10. 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 957-78, December.
  11. Katsuya Takii & Ryuichi Tanaka, 2006. "Does the Diversity of Human Capital Increase GDP? A Comparison of Education Systems," Discussion Papers in Economics and Business 06-19, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  12. Kim, Se-Jik & Kim, Yong Jin, 2000. "Growth gains from trade and education," Journal of International Economics, Elsevier, vol. 50(2), pages 519-545, April.
  13. Black, Sandra E. & Sokoloff, Kenneth L., 2006. "Long-Term Trends in Schooling: The Rise and Decline (?) of Public Education in the United States," Handbook of the Economics of Education, Elsevier.
  14. Gianfranco DE SIMONE, 2012. "Render unto primary the things which are primary's. Inherited and fresh learning divides in Italian lower secondary education," Departmental Working Papers 2012-14, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  15. Bougheas, Spiros & Riezman, Raymond, 2007. "Trade and the distribution of human capital," Journal of International Economics, Elsevier, vol. 73(2), pages 421-433, November.
  16. Matilde Bombardini & Giovanni Gallipoli & Germán Pupato, 2009. "Skill Dispersion and Trade Flows," NBER Working Papers 15097, National Bureau of Economic Research, Inc.
  17. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
  18. Pasqualino Montanaro, 2008. "Learning divides across the Italian regions: Some evidence from national and international surveys," Questioni di Economia e Finanza (Occasional Papers) 14, Bank of Italy, Economic Research and International Relations Area.
  19. Franziska Ohnsorge & Daniel Trefler, 2007. "Sorting It Out: International Trade with Heterogeneous Workers," Journal of Political Economy, University of Chicago Press, vol. 115(5), pages 868-892, October.
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