Effects of economic shocks on dropouts from higher education: evidence from the Brazilian trade liberalization

• Grant number: 23/10322-7
• Support Opportunities: Scholarships abroad - Research Internship - Doctorate
• Start date: September 26, 2023
• End date: March 25, 2024
• Field of knowledge: Applied Social Sciences - Economics - International Economy
• Principal Investigator: Emanuel Augusto Rodrigues Ornelas
• Grantee: Lucas de Castro Mariano
• Supervisor: Tiago Vanderlei de Vasconcelos Cavalcanti
• Host Institution: Escola de Economia de São Paulo (EESP). Fundação Getúlio Vargas (FGV). São Paulo , SP, Brazil
• Institution abroad: University of Cambridge, England
• Associated to the scholarship: 21/14505-3 - Effects of economic shocks on university dropouts: evidence from the Brazilian trade liberalization, BP.DR

Abstract

This research project aims to study the link between trade shocks and educational decisions, in particular, the effects of the Brazilian trade liberalization in 1991 on dropout rates from higher education. The trade shock in Brazil had negative consequences on the labor market, entailing both an income effect and a substitution effect on educational choices. We use a shift-share instrument design combining tariff cuts and employment across industries in a region to measure local economy exposure to the trade shock. Ongoing results find that regions more exposed to the exogenous tariff cuts experienced a permanent relative increase in dropout rates of 7\% twenty years after the trade reform. Moreover, we compute different regional tariff shock measures for adult and young workers to separate income and substitution effects from the trade shock. We find that the net effect is mainly explained by the impact on adult workers, suggesting that the income effect more than offsets the substitution effect in determining the impact of tariff cuts. I hope to continue my research as a visiting student in the Faculty of Economics at the University of Cambridge under the supervision of professors Tiago Cavalcanti and Meredith Crowley. There, I plan to develop the next steps of the research, which comprise: investigating the effect of the liberalization on i) the incidence of idleness among young adults and ii) the informal labor market for young workers; iii) the development of a theoretical model of educational choice to describe how an economic shock affects enrollment and dropout in higher education; iv) analyzing a possible extension of the research relating the trade shock and intergenerational mobility trends in Brazil. (AU)