Trade Liberalization and Chinese Students in US Higher Education

Abstract

We investigate whether trade liberalization encourages Chinese student enrollment in US universities. We focus on China's accession to the World Trade Organization and show that Chinese cities more exposed to this trade liberalization episode sent more students to US universities. Results indicate that growth in housing income/wealth was an important channel that allowed many Chinese families to afford US tuition, consistent with large growth in the share of Chinese students that finance their studies primarily using personal funds. Other potential mechanisms, such as changing returns to education or information flows, appear to play less of a role. We also inform distributional consequences for the US. Trade liberalization induced increases in the share of Chinese students studying non-STEM fields, at the Bachelors level, and also at less-selective US universities. Student inflows were similar in both low and high human capital areas in the US, indicating that educational exports do not exacerbate regional inequality. An important conclusion of our work is that the trade deficit in goods partially cycles back as a surplus in education exports to China.

Keywords: International Students, Trade Liberalization, China, Migration

JEL Classification: F16, I25, J24, J61