Transfer of educational investment

Study commissioned by the Saxon State Chancellery. Education is one of the central responsibilities of German states (Länder). The federal states design education policy largely on their own, but must also bear the expenditure involved. With large intra-German migration, the benefits of human capital investments do not accrue in the state that finances education. The purpose of this study is to calculate the net flows of human capital investments across German states. In a first step, age-specific migrant flows between the states are determined. Saxony experiences a net immigration from the other East German states while it loses population to the western states. Most people migrate to the large and economically powerful states in southern Germany. Migration takes place mainly at the ages of 20 to 35 and is positive correlated to education. Saxony tends to lose young and educated people. In a second step, the costs of education are determined for each year of age and skill level. In a final step, these age-and skill-specific education costs are combined with the migration flows. Saxony gains education investments from the other East German federal states, but loses education investments to the West German federal states. In total Saxony loses more investments in education than it wins.