Optimal Educational Policies and Comparative Advantage

Spiros Bougheas, Richard Kneller and Raymond Riezman

Discussion Papers from University of Nottingham, GEP

Abstract: We consider the optimal education policies of a small economy whose government has a limited budget. Initially, the economy is closed and the government chooses its education policy to maximize welfare under autarky. Then the economy trades with the rest of the world. Lastly, the government chooses a new education policy that maximizes welfare under trade. Is it ever optimal for the government to choose its new policy so that it reverses the economy's comparative advantage? We find that if the budget stays fixed when it is optimal to `move up the skills chain' it is not feasible. In such a case a foreign loan is welfare imroving. A move in the opposite direction can be optimal and when it is optimal it is also feasible.

Keywords: Patterns of Trade; Education Policy; Welfare (search for similar items in EconPapers)
Date: 2009
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Related works:
Journal Article: OPTIMAL EDUCATION POLICIES AND COMPARATIVE ADVANTAGE (2011)
Working Paper: Optimal Education Policies and Comparative Advantage (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:not:notgep:09/02

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