Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
Changes in the terms of trade affect both the incentives and the ability of individuals to purchase education in a credit‐constrained economy. A model is developed that shows how individual decision‐making is affected in a small economy when it opens up to trade. Empirical results indicate that credit constraints are an important factor influencing school enrollment rates, particularly in low income countries. As a result, countries with low human capital stocks tend to increase their accumulation of human capital with increased trade. The response in high income countries is more muted.