Trade Liberalization and Human Capital Formation: Schooling, Learning, and Early Labor Market Outcomes in Peru

Ryan Abman, Leah Lakdawala, Clark Lundberg and Eduardo Nakasone
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Ryan Abman: San Diego State University
Leah Lakdawala: Wake Forest University
Clark Lundberg: San Diego State University and Center for Effective Global Action
Eduardo Nakasone: Food and Agriculture Organization of the United Nations

No 141, Working Papers from Wake Forest University, Economics Department

Abstract: Trade liberalization can increase schooling while reducing what children learn. We study this tension in Peru, where large unilateral tariff reductions between 2007 and 2016 generated substantial local variation in import competition. Combining household surveys with administrative records of test performance, we examine effects on children's schooling, work, learning, and later outcomes. We document a trade-off between schooling quantity and learning quality: greater exposure increased attendance but reduced relative gains in math achievement. This pattern extends from primary into secondary school, where exposed districts saw even larger participation gains, yet the relative math learning gap continued to widen as affected cohorts aged. We trace these effects to countervailing income and substitution channels. Declining protected-sector opportunities lowered the opportunity cost of schooling, while negative income shocks led more children to work while in school and shifted students from private to public schools, where teachers per student fell. In the longer run, affected cohorts were more likely to complete secondary school but shifted away from university and toward technical and professional programs, and by young adulthood were less likely to be employed and earned lower wages. Trade reforms can thus expand school access while weakening skill formation, revealing human-capital costs that enrollment metrics may miss

Keywords: trade liberalization; import competition; human capital; schooling; learning; child labor; Peru (search for similar items in EconPapers)
JEL-codes: F13 F16 I21 I25 J22 O15 (search for similar items in EconPapers)
Pages: 89
Date: 2026-09
New Economics Papers: this item is included in nep-dev, nep-edu, nep-lam and nep-uep
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