Cartiglia shows that trade increases human capital investment in developing countries unless there are credit markets for individuals. In this paper, when households can borrow the education cost from a market, a trade-induced decrease in the skilled wage leads to less human capital investment in developing countries. The result of this paper ensures that the standard results of Findlay and Kierzkowski where capital market is perfect are still supported even when there is a credit market imperfection such as risk premium.
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