International Capital Market Integration, Educational Choice and Economic Growth

Hartmut Egger (), Peter Egger, Josef Falkinger and Volker Grossmann

No 1630, CESifo Working Paper Series from CESifo

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.

Keywords: capital mobility; capital-skill complementarity educational choice; education policy; economic growth; wage income inequality (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-dev, nep-edu, nep-hrm and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Working Paper: International Capital Market Integration, Educational Choice and Economic Growth (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1630

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