Financial liberalisation and educational attainment : evidence from second generation immigrants

• Main Authors: Yeo, Adeline Hui Ting, Kishore Chandramohgan, Lee, Gui Xian
• Other Authors: James Ang
• Format: Final Year Project
• Language: English
• Published: 2017
• Subjects: DRNTU::Humanities
• Online Access: http://hdl.handle.net/10356/69748
• Institution: Nanyang Technological University

The topic of financial liberalisation has been increasingly explored over the past several decades. However, existing studies focus largely on the effects financial liberalisation have on physical capital accumulation. Therefore, this paper seeks to examine the effects of financial liberalisation on human capital, specifically education, which is another important form of capital accumulation in an economy. In order to mitigate the problem of reverse causality, we will be looking at the intergenerational transmission effect of financial liberalisation on second generations’ education. In our study, we use individual level education data from the 2008 European Values Survey and regress it on Abiad and Mody’s (2005) Financial Liberalisation Index. Our results reveal that the degree of financial liberalisation in parents’ country of origin is highly significant in determining one’s educational attainment. On average, an extreme change from 0 to 1 in the index can substantially increase the respondent’s education level by one level. In addition, we find that indicators of financial development and financial openness are also highly significant in determining individual’s educational attainment. These results have important implications for policy implementation as they reinforce the argument for countries to become financially liberalised due to the positive effects on human capital accumulation.