An econometric model on bilateral trade in education using an augmented gravity model
Abstract: Trade in education
has become one of the most important trades for many economies. Yet, studies of
education as a trade are scant owing to the conventional view of it being
non-tradable. The purpose of this paper is to econometrically investigate trade
in education using a nexus of international trade theories and the gravity
model, one of the most widely used models in international trade in goods that
has been scantly investigated on in studies on trade in education.
Design/methodology/approach: A panel data analysis is broken down for 21
exporting countries and 50 importing countries, covering 1050 observations
using new UNESCO database. A number of determinants of international trade
including wealth of exporter & importer, domestic capacity of exporter
& importer, transport costs, common religion, common language and trade
restrictiveness of the importer are empirically tested on bilateral trade flows
in education. An econometric model is formulated to test determinants of trade
in education using an augmented gravity model.
Findings: The augmented gravity model used in this study explains with
high significance the determinants of trade in education including wealth of
exporter & importer, domestic capacity of exporter & importer,
transport costs, common religion, common language and trade restrictiveness of
the importer.
Research limitations/implications: Taking a macroscopic view of education
as a trade may give us a myopic view of the elements important to determine
what students or parents of students as well as institutions are concerned
with. Nevertheless, the nexus of international trade theories and the gravity
model used in this study that are largely and traditionally used on trade in
goods and services, but scantly used in trade in education have been found to
be highly significant and relevant in trade in education. Future studies on
macro-level of analysis involving trade in education could include other
determinants of trade in education or trade in goods/services to test for their
relevance and significance in this area of study.
Practical implications: This paper aims to contribute to existing
literature on trade in services and trade in education by borrowing some of the
same assumptions on market structures usually made for services and
international trade to show that the international trade theories can help
explain the pattern of trade in education. The econometric model formulated
enables governments to design policies that could facilitate, direct and
promote the development and growth of education as a trade. It could also
assist institutions to adjust and choose more efficient methods of structuring
their policies and formulating their marketing strategies, targeted towards
different country segments.
Social implications: With the share of education services in world trade
increasing, it becomes even more important to be able to accurately model trade
in education services. Thus, my introduction of the augmented gravity model on
trade in education provides new and interesting avenues for further macro
research of trade in education on an international platform.
Originality/value: I borrow the same assumptions on market structures
usually made for services to show that international trade theories can help
explain the pattern of trade in education. This paper proposes an effective
econometric model using the gravity equation to help governments as well as
institutions evaluate the importance of the various determinants of trade in
education.
Keywords: Trade in services;
international trade; trade in education; gravity model; trade restrictiveness;
Generally Accepted Trade in Services(GATS); consumption abroad
Author: Christina Tay
Journal Code: jptindustrigg140052
