THE SKILL AND HIGHER EDUCATIONAL CONTENT OF UK NET EXPORTS
| DOI | http://doi.org/10.1111/j.1468-0084.1993.mp55002001.x |
| Date | 01 May 1993 |
| Published date | 01 May 1993 |
| Author | Allan Webster |
OXFORD BULLETIN
of
ECONOMICS and STATISTICS
OXFORD BULLETIN OF ECONOMICS AND STATISTICS, 55,2(1993)
0305-9049 $3.00
THE SKILL AND HIGHER EDUCATIONAL
CONIENT OF UK NET EXPORTS
Allan Webster
I. INTRODUCTION
The UK is clearly one of the developed world's more open economies and,
with the coming of increased European integration, can only become yet
more dependent upon international trade in the future. To a large extent,
therefore, the goods it currently produces and those it will produce in the
future depend largely on what it can produce relatively efficiently in world or,
at least, European terms. The most obvious concept to assess these relative
strengths and weaknesses is that of comparative advantage.
Modern concepts of comparative advantage extend beyond the traditional
focus of the Heckscher-Ohlin model on endowments of physical capital and
labour alone as the sources of comparative advantage. In particular, labour
skills and education - human capital' - are widely thought to be important
determinants of countries' specialization in the process of international trade.
So, for example, comparative advantage principles suggest that an economy
abundantly endowed in human capital will tend to export human capital
intensive goods and services and to import ones intensive in other factors of
production.
To date, the influence of labour skills and education on the UK's inter-
national trade is not extensively documented. Moreover, studies of other
countries tend to treat human capital as a relatively homogeneous factor.
Since there are many different types of skill and education the reality is quite
different. This creates the possibility that countries will specialize not just
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according to their overall endowment of human capital but also according to
different types of human capital. For example, we might expect a country
abundant in skilled and educated engineers to possess some advantage in
engineering.
Documenting the link between the UK's human capital and its inter-
national trade has implications beyond the study of comparative advantage.
Firstly, the idea that an abundance of skills of certain types generates export
industries which are competitive relative to foreign competition and a scarcity
of other types of skill, uncompetitive import competing sectors is not very far
removed from concepts of skill shortages and their consequences. In this
sense, then, assessing the extent to which the UK specializes in industries
intensive in particular types of skills is a way of revealing where the UK is in
relatively scarce or abundant supply of a particular skill.
Secondly, education is clearly an important element of the broader notion
of skills or human capital. Since education is largely provided by the state,
current endowments of skilled or educated labour are clearly heavily
influenced by past educational policy. Measuring the UK's trade performance
in terms of its specialization according to human capital in general and in
terms of specific skills is, therefore, a basis for evaluating the performance of
past educational policy in terms of its effects on the international trading
position of the economy.
To assess these issues this paper analyses the determinants of UK net
exports in 1984 with particular emphasis on the role of human capital. The
analysis is based upon the factor content version of the Heckscher-Ohlin
model of international trade. It predominantly uses calculations of the type
first employed by Leontief (1953) but developed subsequently by numerous
authors. lt finds the UK in 1984 to be revealed to have been relatively scarce
in manual skills compared to its trading partners. Evidence is provided to
suggest a weaker form of scarcity in many professional skills.
II. METHODOLOGY AND DATA
A large number of studies employing either Leontief-type techniques or
regression analysis or (more rarely) both have been conducted for the sources
of US comparative advantage - see, for example, Baldwin (1971), Stern and
Maskus (1981), Sveikauskas (1983), Maskus (1985) and Hartigan and Tower
(1986). Studies of other economies have tended to be much less numerous.
Urata (1983) and Vestal (1989) have conducted studies for Japan and
Gremmen and Vollebergh (1986) for the Netherlands.
For the UK, Crafts and Thomas (1986) provide a combined factor content
and regression analysis of the soruces of UK comparative advantage for
1910-35. Katrak (1973) provides a regression analysis of UK exports and
(1982) a factor content study of UK trade in 1962, 1972 and 1978. Regres-
sion studies of the relationship between UK trade and innovation have been
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