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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.:IZA Discussion Papers 1863
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 non-compulsory 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:F20
H52
J24
O10
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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