International Capital Market Integration, Educational Choice and Economic Growth

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

No 1863, IZA Discussion Papers from Institute for the Study of Labor (IZA)

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.

Keywords: capital mobility; capital-skill complementarity; educational choice; education policy; economic growth; wage income inequality (search for similar items in EconPapers)
JEL-codes: F20 H52 J24 O10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-edu, nep-hrm and nep-pbe
Date: Written 2005-11
View list of references

Downloads: (external link)
ftp://repec.iza.org/RePEc/Discussionpaper/dp1863.pdf (application/pdf)

Related works:
Working Paper: International Capital Market Integration, Educational Choice and Economic Growth (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute for the Study of Labor (IZA)
Address: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Contact information at EDIRC.
Series data maintained by Mark Fallak ().