Long-term impact of trade liberalization on human capital formation

Jie Li, Yi Lu, Hong Song and Huihua Xie

Journal of Comparative Economics, 2019, vol. 47, issue 4, 946-961

Abstract: While a growing line of research has assessed the effect of trade liberalization on human capital formation, most of these studies focus on its short-term effect on individual’s school attendance. Much less is known about its long-run effect, as well as the impact on other aspects of human capital formation such as labor market and noncognitive outcomes. This paper studies the impact of trade liberalization on individuals’ long-term human capital accumulation, including school attendance, cognitive abilities, labor market performance, and noncognitive outcomes. By constructing prefecture-year-level tariff barriers, our identification strategy exploits variations in different cohorts’ exposure to a trade shock at age 16 for individuals within the same prefecture. Empirical results suggest that trade liberalization leads to decreased completed years of schooling, cognitive abilities, wage, and noncognitive outcomes. We provide suggestive evidence that this observed pattern is explained by the expansion of job opportunities in relatively low-skilled and labor-intensive sectors.

Keywords: Trade liberalization; Tariff reduction; Human capital; Long-term effect (search for similar items in EconPapers)
JEL-codes: F14 F16 J24 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:47:y:2019:i:4:p:946-961

DOI: 10.1016/j.jce.2019.08.002

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