Essays in Education and International Trade
Open Access
- Author:
- Brahmachari, Meghna
- Graduate Program:
- Economics
- Degree:
- Doctor of Philosophy
- Document Type:
- Dissertation
- Date of Defense:
- May 24, 2019
- Committee Members:
- Kala Krishna, Dissertation Advisor/Co-Advisor
Kala Krishna, Committee Chair/Co-Chair
Stephen Ross Yeaple, Committee Member
Michael David Gechter, Committee Member
David Gerard Abler, Outside Member - Keywords:
- Education
Rules of Origin
Regional Exposure
Skill premium
information - Abstract:
- My dissertation consists of three chapters on topics in development, specifically education, and international trade. In Chapter 1, I study how regional variation in information about the returns to a college education contributes to variation in college attainment across regions within the United States. There is a large dispersion in college attainment rates across regions in the US. In this paper, I show that the share of college educated in the local labor force acts as an information channel through which college age individuals learn about the returns to a college education. Using richly detailed individual level panel data I show that the responsiveness of the college attainment decision to the local college premium varies significantly with the existing share of college educated in the local labor force. This effect persists even when accounting for other channels studied in the literature like school quality. To understand the implications of local learning on the aggregate supply of skill, I present a model of endogenous skill acquisition with uncertainty and learning about the returns to skill from the existing share of skilled in the local labor force. Using this framework, I numerically show how this local learning channel can give rise to persistent dispersion in rates of skill acquisition across regions. Low skill traps arise when initial beliefs are low compared to the actual realization of the high skill wage. In Chapter 2 of my dissertation, I study how non-tariff barriers to international trade affect the quality of exports from developing countries. Specifically, I study the impact of a change in the Rules of Origin imposed by the European Union (EU) on apparel exports from Bangladesh to the EU. Rules of Origin are a trade policy instrument that allows for tariff-free (or lower tariff) entry of exports from certain countries conditional upon those exports meeting a minimum value added requirement in the origin country. The change in the Rules of Origin imposed by the EU relaxed the sourcing restrictions on material inputs in the apparel sector. I find that instead of resulting in lower output prices as might initially be expected, there was an increase in the price of apparel exports from Bangladesh to the EU. I explain this observation in a setting that takes into account the quality of material inputs. Instead of lowering prices, firms upgraded the quality of material inputs sourced. Thus my work shows how stringent Rules of Origin can prevent firms in developing countries with limited access to high quality inputs from upgrading the quality of their output, and climbing the quality ladder. Chapter 3 of my dissertation is joint work with Marisol Rodríguez Chatruc at the Inter-American Development Bank. There is a growing literature which shows that shocks to international trade can have heterogenous effects across regions within a country. This literature takes two broad approaches. The first approach is reduced-form and consists of regressing changes in regional outcomes on measures of regional exposure to trade. The variation in these measures of regional exposure is primarily driven by variation in sectoral employment shares across regions. The second approach estimates structural general equilibrium models and quantifies the changes in regional outcomes in response to a trade shock through counterfactual exercises. We show that the reduced-form measures of regional exposure cannot be derived from a general equilibrium model even when only considering the partial equilibrium effect. Using Brazilian data on sub-country trade flows, we show that these analytical differences between the reduced form and theoretical measures of exposure translate into quantitative differences in the measures’ correlation with model-based equilibrium wage changes in response to a trade cost shock. We also show that the rank correlation between the different measures of regional exposure are sensitive to the source country of the import cost shock. The results presented caution against relying too heavily on reduced-form exposure measures to recover partial elasticities of regional wages to an international trade shock.