Trade openness and human capital investment in Thailand

Published: 9 July 2024| Version 1 | DOI: 10.17632/5c383fhnxc.1
Varan Kitayaporn


I study the effects of export growth on the skill premium and educational attainment in Thailand. I develop an overlapping generations model to analyze schooling decisions of households when export growth creates more job opportunities in unskilled sectors. An increase in the unskilled wage can reduce the skill premium and encourage early school dropouts. However, a higher unskilled wage can also enable more schooling among credit-constrained households via an income effect, especially when schooling is not free. The net effect may differ depending on factors like household wealth and the ability of the child. I use Thailand's household data from 1995 to 2019 to empirically test my model's predictions, exploiting provincial variation in trade exposure. On average, the effect of the fall in skill premium slightly dominates the income effect, leading to a net decrease of 0.1-0.6 percentage points in school enrollment for each one percent increase in export exposure. Nonetheless, the effect of export exposure is likely to be more positive among highly credit-constrained households and among children of higher ability. Due to the Microdata User Agreement with Thailand’s National Statistical Office (NSO), the household data contained in the Labor Force Surveys and Socio-economic Surveys must be held confidential. Only the statistical codes are available. The international trade and tariff data and codes are fully available.



Economics, International Trade, Development of Economics