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 ().