IDEAS home Printed from https://ideas.repec.org/p/wiw/wiwrsa/ersa06p153.html
   My bibliography  Save this paper

Investments in Higher Education and the Economic Performance of OECD Member Countries

Author

Listed:
  • Amnon Frenkel
  • Eran Leck

Abstract

Universities and academic research institutions play an important role in contributing to the economic growth of countries, mainly through the diffusion of scientific knowledge, new methods, and technologies. This study investigates the relationship between investments in higher education and the economic performance of developed countries. Cross-sectional data, relating to higher education, workforce composition, and macro-economic indicators, were analyzed. The empirical analysis was based on data gathered from international datasets: World Development Indicators (WDI) of the World Bank, OECD Statistics Portal, and UNSECO for the 30 OECD member states. The main research hypothesis was that a positive and significant linkage exists between investment in higher education and economic growth. The examination was carried out by employing two models. The first model (a two-stage model) assumed that an indirect link existed between higher education and economic growth. The instrumental indicator used in the analysis was the country’s labor force composition (specifically, the percentage of employees in scientific and engineering fields). The second model employed a multivariate regression model to directly test the relationship between higher education and growth indicators. The research findings show that higher education inputs translate into human capital outputs (a trained workforce in the computing, science, and engineering fields), and these transform back into the inputs that explain the economic performance of OECD countries. Smaller European countries, such as Finland, the Netherlands, and Denmark, are more efficient in translating their educational investments into a high-quality labor force. The two main activities of universities - teaching and research - were found to be connected to enhancing the per capita GDP of OECD countries. The research findings also support evidence from other studies that show decreasing returns to scale in education. The elasticity of per capita GDP with respect to R&D expenditure per student and the expenditure on teaching in research universities were found to be fairly large, with a constant elasticity of 0.78% and point elasticities (when expenditure on teaching is held constant) ranging from 0.04% (Turkey) to 0.84% (Sweden). Point elasticities for the majority of OECD countries were found to be at the 0.2%-0.5% level.

Suggested Citation

  • Amnon Frenkel & Eran Leck, 2006. "Investments in Higher Education and the Economic Performance of OECD Member Countries," ERSA conference papers ersa06p153, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa06p153
    as

    Download full text from publisher

    File URL: https://www-sre.wu.ac.at/ersa/ersaconfs/ersa06/papers/153.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Feldman, Maryann P. & Audretsch, David B., 1999. "Innovation in cities:: Science-based diversity, specialization and localized competition," European Economic Review, Elsevier, vol. 43(2), pages 409-429, February.
    2. Roper, Stephen & Frenkel, Amnon, 1999. "Different Paths to Success: The Growth of the Electronics Sector in Ireland and Israel," ERSA conference papers ersa99pa302, European Regional Science Association.
    3. Salter, Ammon J. & Martin, Ben R., 2001. "The economic benefits of publicly funded basic research: a critical review," Research Policy, Elsevier, vol. 30(3), pages 509-532, March.
    4. Mansfield, Edwin, 1991. "Academic research and industrial innovation," Research Policy, Elsevier, vol. 20(1), pages 1-12, February.
    5. Barbara Sianesi & John Van Reenen, 2003. "The Returns to Education: Macroeconomics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(2), pages 157-200, April.
    6. Barro, Robert J. & Lee, Jong-Wha, 1993. "International comparisons of educational attainment," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 363-394, December.
    7. Beise, Marian & Stahl, Harald, 1999. "Public research and industrial innovations in Germany," Research Policy, Elsevier, vol. 28(4), pages 397-422, April.
    8. A. Varga, 2006. "Spatial Knowledge Spillovers and University Research: Evidence from Austria," Springer Books, in: Innovation, Networks, and Knowledge Spillovers, chapter 10, pages 211-232, Springer.
    9. Audretsch, David B & Feldman, Maryann P, 1996. "R&D Spillovers and the Geography of Innovation and Production," American Economic Review, American Economic Association, vol. 86(3), pages 630-640, June.
    10. Stephen Roper & Amnon Frenkel, 2000. "Different Paths to Success—The Growth of the Electronics Sector in Ireland and Israel," Environment and Planning C, , vol. 18(6), pages 651-665, December.
    11. Luc Anselin & Attila Varga & Zoltan Acs, 2008. "Local Geographic Spillovers Between University Research and High Technology Innovations," Chapters, in: Entrepreneurship, Growth and Public Policy, chapter 9, pages 95-121, Edward Elgar Publishing.
    12. Jaffe, Adam B, 1989. "Real Effects of Academic Research," American Economic Review, American Economic Association, vol. 79(5), pages 957-970, December.
    13. Nelson, Richard R, 1986. "Institutions Supporting Technical Advance in Industry," American Economic Review, American Economic Association, vol. 76(2), pages 186-189, May.
    14. Berman, Evan M., 1990. "The economic impact of industry-funded university R&D," Research Policy, Elsevier, vol. 19(4), pages 349-355, August.
    15. Monojit Chatterji, 1998. "Tertiary Education and Economic Growth," Regional Studies, Taylor & Francis Journals, vol. 32(4), pages 349-354.
    16. Adams, James D, 1990. "Fundamental Stocks of Knowledge and Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 673-702, August.
    17. Barrie Needham & Alastair Adair & Peter van Geffen & Marco Sotthewes, 2003. "Measuring the effects of public policy on the finances of commercial development in redevelopment areas: gap funding, extra costs and hidden subsidies," Journal of Property Research, Taylor & Francis Journals, vol. 20(4), pages 319-342, December.
    18. Mansfield, Edwin & Lee, Jeong-Yeon, 1996. "The modern university: contributor to industrial innovation and recipient of industrial R&D support," Research Policy, Elsevier, vol. 25(7), pages 1047-1058, October.
    19. Martin, Fernand, 1998. "The economic impact of Canadian university R&D," Research Policy, Elsevier, vol. 27(7), pages 677-687, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Robbiano, Simone, 2022. "The innovative impact of public research institutes: Evidence from Italy," Research Policy, Elsevier, vol. 51(10).
    2. Nola Hewitt-Dundas, 2013. "The role of proximity in university-business cooperation for innovation," The Journal of Technology Transfer, Springer, vol. 38(2), pages 93-115, April.
    3. Nelson, Andrew J., 2012. "Putting university research in context: Assessing alternative measures of production and diffusion at Stanford," Research Policy, Elsevier, vol. 41(4), pages 678-691.
    4. Salter, Ammon J. & Martin, Ben R., 2001. "The economic benefits of publicly funded basic research: a critical review," Research Policy, Elsevier, vol. 30(3), pages 509-532, March.
    5. Beise, Marian & Stahl, Harald, 1999. "Public research and industrial innovations in Germany," Research Policy, Elsevier, vol. 28(4), pages 397-422, April.
    6. Castelnovo, Paolo & Florio, Massimo & Forte, Stefano & Rossi, Lucio & Sirtori, Emanuela, 2018. "The economic impact of technological procurement for large-scale research infrastructures: Evidence from the Large Hadron Collider at CERN," Research Policy, Elsevier, vol. 47(9), pages 1853-1867.
    7. Foray, Dominique & Lissoni, Francesco, 2010. "University Research and Public–Private Interaction," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 275-314, Elsevier.
    8. Maietta, Ornella Wanda, 2015. "Determinants of university–firm R&D collaboration and its impact on innovation: A perspective from a low-tech industry," Research Policy, Elsevier, vol. 44(7), pages 1341-1359.
    9. Andrea Bonaccorsi & Cinzia Daraio, 2013. "Knowledge spillover effects at the sub-regional level. Theory and estimation," DIAG Technical Reports 2013-13, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    10. Nobuya Fukugawa, 2013. "University spillovers into small technology-based firms: channel, mechanism, and geography," The Journal of Technology Transfer, Springer, vol. 38(4), pages 415-431, August.
    11. Lili Wang & Zexia Li, 2021. "Knowledge flows from public science to industrial technologies," The Journal of Technology Transfer, Springer, vol. 46(4), pages 1232-1255, August.
    12. Hong, Wei & Su, Yu-Sung, 2013. "The effect of institutional proximity in non-local university–industry collaborations: An analysis based on Chinese patent data," Research Policy, Elsevier, vol. 42(2), pages 454-464.
    13. Kolympiris, Christos & Kalaitzandonakes, Nicholas & Miller, Douglas, 2014. "Public funds and local biotechnology firm creation," Research Policy, Elsevier, vol. 43(1), pages 121-137.
    14. Harvey Goldstein & Joshua Drucker, 2006. "The Economic Development Impacts of Universities on Regions: Do Size and Distance Matter?," Economic Development Quarterly, , vol. 20(1), pages 22-43, February.
    15. Anthony Arundel & Aldo Geuna, 2001. "Does Proximity Matter for Knowledge Transfer from Public Institutes and Universities to Firms?," SPRU Working Paper Series 73, SPRU - Science Policy Research Unit, University of Sussex Business School.
    16. Joshua Drucker & Harvey Goldstein, 2007. "Assessing the Regional Economic Development Impacts of Universities: A Review of Current Approaches," International Regional Science Review, , vol. 30(1), pages 20-46, January.
    17. Matthias Firgo & Peter Mayerhofer, 2015. "Wissens-Spillovers und regionale Entwicklung - welche strukturpolitische Ausrichtung optimiert des Wachstum?," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 144, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.
    18. Beck, Mathias & Junge, Martin & Kaiser, Ulrich, 2017. "Public Funding and Corporate Innovation," IZA Discussion Papers 11196, Institute of Labor Economics (IZA).
    19. Bronwyn H. Hall & Albert N. Link & John T. Scott, 2003. "Universities as Research Partners," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 485-491, May.
    20. Gersbach, Hans & Sorger, Gerhard & Amon, Christian, 2018. "Hierarchical growth: Basic and applied research," Journal of Economic Dynamics and Control, Elsevier, vol. 90(C), pages 434-459.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa06p153. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Gunther Maier (email available below). General contact details of provider: http://www.ersa.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.