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TRADE AND DIVERGENCE IN EDUCATION SYSTEMS
Author(s) -
Chang PaoLi,
Huang Fali
Publication year - 2014
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12089
Subject(s) - autarky , comparative advantage , economics , divergence (linguistics) , microeconomics , nash equilibrium , distribution (mathematics) , education policy , international economics , economic system , international trade , higher education , economic growth , market economy , welfare , linguistics , philosophy , mathematical analysis , mathematics
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.