Title

Essays in international trade, human capital and income distribution

Date of Award

12-2002

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Economics

Advisor(s)

J. David Richardson

Keywords

International trade, Human capital, Income distribution, Hecksher-Ohlin theorem

Subject Categories

Economic Theory | International Economics | Labor Economics

Abstract

This dissertation attempts to empirically explain the linkage between increasing trade openness and human capital accumulation, and assess the influence of intra-country income inequality on this linkage, among global economies with differential intensities of factor endowments. Analysis is based on the Hecksher Ohlin Samuelson theory, which suggests that trade could perversely shift factor returns (Stoper Samuelson affect of trade on wages) to enlarge inter-country differences in factor endowments and alter incentives for human capital accumulation. The estimation method employed, in this thesis, is fixed-effects panel data regressions, for the period 1960-1995. Only the third essay has an unbalanced panel due to missing information on income inequality for some years.

The first essay poses the question: how does international trade influence schooling enrolment ratios among open economies? We conclude that more trade openness has augmented human capital accumulation, at all levels of education, for skill abundant countries. But for skill-scarce countries, even though trade openness has enhanced human capital accumulation at the secondary and primary levels, it has decreased their tertiary enrolment rates.

The second essay proposes and computes an alternative indicator of human capital--'Sector-Based Skill Premium' that is a price-analog to the enrolment measure of human capital. Econometric estimation of the hypothesis proposed in the first essay, with this new indicator, suggests that increased trade has indeed decreased human capital acquisition for skill-scarce, labor-abundant economies, while contributing to an increase in human capital in skill-abundant economies.

The third essay introduces a new variable--income inequality--to the economic ordering examined in the first essay, by exploring whether egalitarian economies accumulate relatively more human capital with increased international trade openness. Estimation analysis indicates that countries with high inequality in their income distribution will have relatively lower human capital accumulation with increased trade openness because income inequality correlates with access to financial markets that determines individuals' abilities to borrow for investment in skill building.

The central conclusion we draw is that trade is a mixed blessing for most semi-skilled, labor-abundant economies.

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