Trade Liberalization and Human Capital Investment: Evidence from Vietnam

Received date: 2026-04-29; Accepted date: 2026-06-19

Abstract

Exploiting a quasi-natural experiment--the Vietnam-U.S. Bilateral Trade Agreement (BTA) - I investigate the impact of trade liberalization on children's human capital investment in Vietnam. Using regional variation in export tariff uncertainty due to the BTA, I find that children in provinces more exposed to tariff reductions were more likely to engage in work rather than attend school. The effects were more pronounced among boys, older children, rural children, and those with less-educated parents. These negative effects are driven by the rise in child labor, with suggestive evidence of higher local wages in more-exposed provinces. The findings indicate that trade liberalization has increased the opportunity cost of education. These results remain robust across various alternative estimations.