Does the Skill Composition of Trade Drive Educational Attainment? A Cross-Country Panel Analysis

In this paper, we examine the question of how trade drives educational attainment in a cross-country panel setting. If a country experience a positive demand shock for exports or a negative supply shock for imports that is intensive in educated labor, the demand for education is expected to increase. We motivate the analysis with a theoretical framework that underscores the relevance of factor intensities across sectors, including the skill acquisition sector, in determining how the composition of trade a⁄ects the demand for education. We show that, consistently with our expectations, variations in the educational composition of exports and imports that follow from supply and demand shocks in partner countries a⁄ect educational attainment. We also show that an increase in exports of capital intensive products has a positive impact on the demand for educated labor, presumably through capital-skill complementarity