Trade and divergence in education systems

• Main Authors: CHANG, Pao Li, HUANG, Fali
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2010
• Subjects: Education System; Talent Distribution; Comparative Advantage; Trade Pattern.; Education; Education Policy; International Economics
• Online Access: https://ink.library.smu.edu.sg/soe_research/1248; https://ink.library.smu.edu.sg/context/soe_research/article/2247/viewcontent/trade_edu.pdf
• Institution: Singapore Management University

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 diferentiate 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, talent distribution, and trade.