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Trade and Divergence in Education Systems

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  • Pao-Li Chang

    (Singapore Management University, School of Economics)

  • Fali Huang

    (Singapore Management University, School of Economics)

Abstract

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.

Suggested Citation

  • Pao-Li Chang & Fali Huang, 2012. "Trade and Divergence in Education Systems," Working Papers 32-2012, Singapore Management University, School of Economics.
    • Handle: RePEc:siu:wpaper:32-2012
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    Cited by:

    1. Chatterjee, Arpita, 2017. "Endogenous comparative advantage, gains from trade and symmetry-breaking," Journal of International Economics, Elsevier, vol. 109(C), pages 102-115.
    2. Arpita Chatterjee, 2014. "Endogenous Comparative Advantage, Gains From Trade and Symmetry-Breaking," Discussion Papers 2014-18, School of Economics, The University of New South Wales.
    3. Deardorff, Alan V., 2013. "Growth or decline of comparative advantage," Journal of Macroeconomics, Elsevier, vol. 38(PA), pages 12-18.

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    More about this item

    Keywords

    Education System; Talent Distribution; Comparative Advantage; Trade Pattern;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • I20 - Health, Education, and Welfare - - Education - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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