This paper presents new insights into the linkage between trade liberalization and human capital formation by looking at the attainment and quality of education in India. It finds that trade liberalization affects the distribution of education. Also, the effect of reforms on attainment rates and quality vary depending on years of exposure to reforms within a particular level of education and by gender.
Evidence From Indian Tariff Reforms
It makes use of the exogenous trade liberalizations in 1991 to establish causal effects of the reforms and household data from The Indian Human Development Survey (IHDS), 2005 to look at the outcomes. The possible channels are explained through a model where trade can affect education decisions of individuals differently at different levels of education through changes in the household income, cost of education and returns to education. I find that on an average there is a decline in years of schooling which is mostly driven by females.The negative effects of trade liberalization are concentrated on the lower and higher end of the education distribution. On the other hand, there seems to be an improvement in the quality of education which is driven by females.