Skill, trade, and international inequality

Heckscher-Ohlin trade theory suggests that greater openness tends to enlarge inter-country differences in stocks of skill (or human capital), which new growth theory suggests would cause inter-country divergence of per capita incomes. Econometric analysis of data on about 90 countries during 1960-90 confirms that greater openness tends to cause divergence of secondary and tertiary enrolment rates between more-educated and less-educated countries, and also between land-scarce and land-abundant countries. These findings may have implications for the optimal choice of trade policies by poor countries.