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Title:International capital market integration, educational choice and economic growth PDF Logo
Authors:Egger, Hartmut
Egger, Peter
Falkinger, Josef
Grossmann, Volker
Issue Date:2005
Series/Report no.:CESifo working papers 1630
Abstract:This paper examines the impact of capital market integration (CMI) on higher education and economic growth. We take into account that participation in higher education is noncompulsory and depends on individual choice. Integration increases (decreases) the incentives to participate in higher education in capital-importing (-exporting) economies, all other things equal. Increased participation in higher education enhances productivity progress and is accompanied by rising wage inequality. From a national policy point of view, education expenditure should increase after integration of similar economies. Using foreign direct investment (FDI) as a measure for capital flows, we present empirical evidence which largely confirms our main hypothesis: An increase in net capital inflows in response to CMI raises participation in higher education and thereby fosters economic growth. We apply a structural estimation approach to fully track the endogenous mechanisms of the model.
Subjects:capital mobility
capital-skill complementarity educational choice
education policy
economic growth
wage income inequality
JEL:O10
J24
H52
F20
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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