Optimal Educational Policies and Comparative Advantage

Nottingham University, GEP Research Paper 2009/02

29 Pages Posted: 12 Aug 2009

See all articles by Spiros Bougheas

Spiros Bougheas

University of Nottingham - School of Economics

Richard Kneller

University of Nottingham

Raymond G. Riezman

Aarhus University - Department of Economics and Business Economics; University of California, Santa Barbara (UCSB) - Department of Economics; University of Iowa - Henry B. Tippie College of Business - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); GEP; Aarhus University - School of Business and Social Sciences

Date Written: February 1, 2009

Abstract

We consider the optimal education policies of a small economy whose government has a limited budget. Initially, the economy is closed and the government chooses its education policy to maximize welfare under autarky. Then the economy trades with the rest of the world. Lastly, the government chooses a new education policy that maximizes welfare under trade. Is it ever optimal for the government to choose its new policy so that it reverses the economy's comparative advantage? We find that if the budget stays fixed when it is optimal to 'move up the skills chain' it is not feasible. In such a case a foreign loan is welfare imroving. A move in the opposite direction can be optimal and when it is optimal it is also feasible.

Keywords: patterns of trade, education policy, welfare

JEL Classification: F11, O15

Suggested Citation

Bougheas, Spiros and Kneller, Richard and Riezman, Raymond G., Optimal Educational Policies and Comparative Advantage (February 1, 2009). Nottingham University, GEP Research Paper 2009/02, Available at SSRN: https://ssrn.com/abstract=1446702 or http://dx.doi.org/10.2139/ssrn.1446702

Spiros Bougheas (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

Richard Kneller

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Raymond G. Riezman

Aarhus University - Department of Economics and Business Economics ( email )

Fuglesangs Allé 4
Aarhus V, 8210
Denmark

HOME PAGE: http://www.biz.uiowa.edu/faculty/rriezman/

University of California, Santa Barbara (UCSB) - Department of Economics ( email )

2127 North Hall
Santa Barbara, CA 93106
United States

University of Iowa - Henry B. Tippie College of Business - Department of Economics ( email )

316 PBB
Iowa City, IA 52242
United States

HOME PAGE: http://www.biz.uiowa.edu/faculty/rriezman/

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

GEP ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

Aarhus University - School of Business and Social Sciences ( email )

Nordre Ringgade 1
Aarhus C, DK-8000
Denmark

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
17
Abstract Views
1,948
PlumX Metrics