Essays on International Trade and Human Capital

Lai, Chun Wei, Department of Economics, University of Virginia
McLaren, John, Department of Economics, University of Virginia
Miller, Amalia, Department of Economics, University of Virginia
Jain, Sanjay, Department of Economics, University of Virginia
Li, Wei

The first chapter of the dissertation examines the impact of increased trade openness on skill acquisition in developing countries. I extend the Heckscher-Ohlin-Samuelson general equilibrium framework to explain the heterogeneous effects of trade liberalization on skill acquisition. I find that setting aside the income effects of international trade, trade liberalization is correlated with an increase in primary school enrollment and completion rates in high literacy developing countries. Meanwhile there is weak evidence that liberalization is correlated with a decrease in secondary school enrollment rates in low literacy developing countries. The results are consistent with the theoretical prediction that the differentiating effects of trade liberalization depend on comparative advantage determined by the endowment of human capital. The second chapter of the dissertation develops a multinomial logit framework to assess the impact of labor costs on the production location choice of U.S. multinational firms. The benefit of the multinomial logit framework is that it reduces the bias of the coefficient estimates and that it allows the estimation of the individual impact of each factor input, as compared with the standard linear regression approach in the literature. Applying the approach to the data on U.S. direct investment abroad in the manufacturing industries, I obtain the estimates of the impact of labor costs on production location choice. The results suggest that the role of labor costs is very small in U.S. vertical foreign direct investment.

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PHD (Doctor of Philosophy)
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