This interaction between education systems and international trade fascinates Associate Professors Huang Fali and Chang Pao Li from the Singapore Management University (SMU) School of Economics. "A country's increasing integration into the world trade system is one potential important factor that drives its long-run changes in education systems. Such influence however has received little attention in the literature," says Professor Chang.
In their first joint research project, entitled "Trade and Divergence in Education Systems", Professors Huang and Chang focused on the interactions between education, workforce diversity and trade. The United States (US), for example, is famous for its extremely decentralised education system and diverse talent distribution. Given this, it is not surprising that the US has a comparative advantage in creative industries such as software, movies and frontier technology. In sharp contrast, Japan, with its very centralised education system, produces a highly homogeneous and well-trained workforce that has been successful in sophisticated manufacturing sectors such as automobiles and machinery.
"Many people may not realise that such a contrast in education systems and talent distributions across countries is not exogenous or given. Instead, the very same process of participation in trade may reinforce the existing contrast in education systems," says Professor Huang. "Our theory further indicates that the observed difference in education and talent distribution may still fall short of the optimal level. In other words, more specialisation and trade by further differentiating education systems may make all countries better off."