Arbeitspapier

Trade, education, and the shrinking middle class

We develop a new model of trade in which educational institutions drive comparative advantage and determine the distribution of human capital within and across countries. Our framework exploits a multiplicity of sectors and the continuous support of human capital choices to demonstrate that freer trade can induce crowding out of the middle occupations towards the skill acquisition extremes in one country, and simultaneous expansion of middle-income industries in another. Individual gains from trade may be non-monotonic in workers' ability, and middle ability agents can lose the most from trade liberalization. Comparing trade and education policy, we find that targeted education subsidies are more effective than tariffs as a means to preserve middle class jobs, while uniform educational subsidies have no effect.

Language
Englisch

Bibliographic citation
Series: CESifo Working Paper ; No. 4141

Classification
Wirtschaft
Neoclassical Models of Trade
Trade Policy; International Trade Organizations
Economic Integration
Trade and Labor Market Interactions
Subject
trade and education policy
skill acquisition
education
income distribution

Event
Geistige Schöpfung
(who)
Blanchard, Emily
Willmann, Gerald
Event
Veröffentlichung
(who)
Center for Economic Studies and ifo Institute (CESifo)
(where)
Munich
(when)
2013

Handle
Last update
10.03.2025, 11:44 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Blanchard, Emily
  • Willmann, Gerald
  • Center for Economic Studies and ifo Institute (CESifo)

Time of origin

  • 2013

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