We develop a new model of trade in which educational institutions drive

comparative advantage and determine the distribution of human capital within

and across countries. Our framework exploits a multiplicity of sectors and the

continuous support of human capital choices to demonstrate that freer trade

can induce crowding out of the middle occupations towards the skill acquisition

extremes in one country, and simultaneous expansion of middle-income industries

in another. Individual gains from trade may be non-monotonic in workers'

ability, and middle ability agents can lose the most from trade liberalization.

Comparing trade and education policy, we find that targeted education subsidies

are more effective than tariffs as a means to preserve "middle class" jobs,

while uniform educational subsidies have no effect.