We highlight a lesser known consequence of China’s growth and integration into the world economy in relation to the United States: the rise of services trade. We demonstrate that the US’s trade deficit in goods cycle back as a surplus in exports of education services. Focusing on China’s accession to the World Trade Organization, we show that Chinese cities more exposed to this trade liberalization episode sent more students to US universities.
Large wage differences between countries (“place premiums”) are well documented. Theory suggests that factor price convergence should follow increased migration, capital flows, and commercial integration.