International Capital Market Integration, Educational Choice and Economic Growth

Hartmut Egger, Peter Egger, Josef Falkinger and Volker Grossmann

No 1863, IZA Discussion Papers from Institute of Labor Economics (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 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; educational choice; capital-skill complementarity; 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)
Pages: 46 pages
Date: 2005-11
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 (12)

Published - published as 'The Impact of Capital Market Integration on Educational Choice and the Consequences for Economic Growth' in: World Economy, 2010, 33 (10), 1241-1268

Downloads: (external link)
https://docs.iza.org/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.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp1863

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 of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().