Long-Term Impact of Trade Liberalization on Human Capital Formation

38 Pages Posted: 9 Nov 2018

See all articles by Jie Li

Jie Li

Capital University of Economics and Business - International School of Economics and Management

Yi Lu

National University of Singapore (NUS) - Department of Economics

Hong Song

Fudan University

Huihua Xie

School of Management and Economics, The Chinese University of Hong Kong

Date Written: November 8, 2018

Abstract

While a growing line of research has assessed the effect of trade liberalization on human capital formation, most of these existing studies focus on short term effect on individual's schooling attendance, and much less is known about it's 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, cog- nitive abilities, labor market performance, and noncognitive outcomes. We use data for China from 1990 to 2010, a period during which the country became increasingly involved in global trade. By constructing prefecture-year-level tariff barriers, our iden- ti cation 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

JEL Classification: F14, F16, J24

Suggested Citation

Li, Jie and Lu, Yi and Song, Hong and Xie, Huihua, Long-Term Impact of Trade Liberalization on Human Capital Formation (November 8, 2018). Available at SSRN: https://ssrn.com/abstract=3280761 or http://dx.doi.org/10.2139/ssrn.3280761

Jie Li

Capital University of Economics and Business - International School of Economics and Management ( email )

Beijing
China

Yi Lu

National University of Singapore (NUS) - Department of Economics ( email )

1 Arts Link, AS2 #06-02
Singapore 117570, Singapore 119077
Singapore
65-65166834 (Phone)

HOME PAGE: http://ylu6.weebly.com

Hong Song (Contact Author)

Fudan University ( email )

600 Guoquan Road
Shanghai, 100045
China

Huihua Xie

School of Management and Economics, The Chinese University of Hong Kong ( email )

Shatin, N.T.
Hong Kong
Hong Kong

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
36
Abstract Views
321
PlumX Metrics