Trade, Income Inequality and Investment in Education

The strong income distributional effects of international trade and the widening wage differential between skilled and unskilled labour in developed countries have been well documented. Consequently, researchers and some policy-makers have argued that increasing sectoral labour mobility and the educational attainment of the population should be a policy priority. This paper looks at the empirical relationships between income inequality, openness, educational attainment and the regulatory framework of tertiary education in OECD countries. Specifically, the objective of the paper is to empirically assess the impact of public versus private investment in university education, tuition fees, educational subsidies and access to student loans on income inequality in a cross-sectional analysis of OECD countries while accounting for their degree of openness to international trade