Foreign Trade,Skill Premium And Human Capital Investment

Since the year of opening up,China’s foreign trade has experienced a rapid development.In the meanwhile,China’s human capital has also viewed a huge transformation.The populace’s cultivation has improved significantly.So has this change in China’s human capital been affected by foreign trade? And what’s the mechanism of this effect? We know that skill premium and employment are two important factors.For one thing,with the development of foreign trade,the skill premium has increased and may boost human capital investment.For another,low-end trade can provide opportunities for low-skilled labor.The growth of this kind of employment may reduce the skill premium and bring a negative impact on human capital investment.However,with trade quality improving,our demand for skilled labor is increasing,which can also lead to the expansion of skill premium.This paper first analyses the effect between trade and human capital investment as well as the mechanism.Then we try to use the methods of OLS and 2SLS to illustrate this effect.We use mediating effect test to verify the existence of the mechanisms.Also,the structural equation model is adopted to compare.Finally,we further analyze the impact of trade on this special investment.Here are the steps of empirical studies in this paper.Firstly,we use CHIP2013 data to illustrate that trade has an active effect on human capital investment.The years of education is used to measure human capital investment.And the percentage of export is used to represent trade.Secondly,we add mediator of skill premium to the basic model to see whether the mechanisms exist.When skill premium is added to this model,it shows that human capital investment is affected by this premium actively.We also conclude that trade can increase the premium.That means trade can affect human capital investment via skill premium,which proves the existence of sill-premium mechanism.However,when we add mediator of low-labor employment to the model,the results have some differences.Though trade can improve low-labor employment,this kind of employment is not good for human capital investment.Thus,trade may have some negative effect on human capital investment through low-labor-employment mechanism.While the whole effect of trade is still positive.To explain that the reason why trade having a positive effect on human capital investment is that skill-premium mechanism plays the main role,we use SEM method and get the result that skill-premium has more influence than low-labor employment.Finally,we also analyze how the quality of this investment is influenced by trade.By using the steps above we get the same conclusions.In the last part of this paper,the effect of trade quality on human capital investment is discussed.We use the percentage of high-tech products to stand for trade quality.And the basic model tells us that trade quality can also bring a positive effect.As trade quality increases the demand for skilled labor and expands the skill premium,we next examine the skill premium mechanism of it.The results show that skill premium can positively affect human capital investment and trade quality can improve human capital investment by increasing skill premium.In conclusion,if we want to realize the economic development sustainably,we must not only keep reforming but also enhance the trade quality.For this paper we mainly have three innovations as follows.First,we not only consider the effect of trade but also the trade quality.Secondly,we further study that there are two mechanisms of the effect of trade and we verify that they do exist.Thirdly,we also consider the effect of trade quality.