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Type Journal Article
Scope Discipline-based scholarship
Title The impact of capital market integration on educational choice and the consequences for economic growth
Organization Unit
Authors
  • H Egger
  • P Egger
  • Josef Falkinger
  • Volke Grossmann
Item Subtype Original Work
Refereed Yes
Status Published in final form
Language
  • English
Journal Title World Economy
Publisher Wiley-Blackwell
Geographical Reach international
ISSN 0378-5920
Volume 33
Number 10
Page Range 1241 - 1268
Date 2010
Abstract Text This paper examines the impact of capital market integration on higher education and the link to economic growth. The analysis takes into account that participation in higher education is non-compulsory and depends on individual choice. Due to capital–skill complementarity, integration increases (reduces) the incentives to participate in higher education in capital-importing (-exporting) economies, all other things equal. From a national policy point of view, public education expenditure should increase after integration of similar economies in order to attract mobile capital. Using foreign direct investment as a measure of capital flows, we present empirical evidence which largely confirms our main hypothesis: an increase in net capital inflows in response to capital market integration raises participation in higher education. In addition, we show that the adjustment in educational attainment is an empirically relevant channel through which capital inflows foster economic growth.
Digital Object Identifier 10.1111/j.1467-9701.2010.01290.x
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