TRADE AND DIVERGENCE IN EDUCATION SYSTEMS. (November 2014)

• Record Type: Journal Article
• Authors: Chang, Pao‐Li; Huang, Fali
• Is Part Of: International economic review. Volume 55:Number 4(2014:Nov.)
• Page Start: 1251
• Page End: 1280
• Publication Date: 2014-11
• Subjects: Economics -- Periodicals; 330.05
• DOI: 10.1111/iere.12089
• Languages: English
• ISSNs: 0020-6598

Abstract

Abstract : This article presents a theory on the endogenous choice of education policy and the two‐way causal relationship between trade and education systems. A country's education system determines its talent distribution and comparative advantage; 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, and yet less than what is socially optimal for the world.