Who Has to Pay for Their Education? Evidence From European Tertiary Education

In this article, we investigate a positive tertiary education externality in 18 European countries. Using a simple Cobb-Douglas-type production function with constant returns to scale, we find that there are positive spillover effects from tertiary education in European countries. According to our model prediction, on average, 72,000 new employed persons with a tertiary education increased gross domestic product per employed person without a tertiary education by US$412 in 2005. From the policy perspective, the existence of positive tertiary education externalities implies that the benefits of tertiary education are diffused through not only education beneficiaries but also the other members of society.