Transcript The effects on growth of the Nasser schooling programme

Education and international
openness in Egypt
Silvia Domeneghetti
Supervisor: prof. R. Fiorentini
Education and international openness in Egypt
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Subject:
Did the schooling programme contribute to increase the country’s
human capital? Did it affect economic growth?
Did the human capital attract new foreign investiments in Egypt in
1990s?
International openness also means trade: a first analysis of the effects
of the trade agreement with the EU.
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Contribution:
My research deals with open questions and applies them to a specific
situation.
Egypt and the neighbouring countries experienced deep reforms and
performed good economic growth. In spite of this, it received little
attention in the literature.
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Education and international openness in Egypt
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3.
Three papers:
The openness to international trade, 1990s
The international investments, 1990s
The schooling progamme, 1950s
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The openness to international trade in Egypt
The literature:
The relation between free trade and growth is not
clearly stated (sign, direction)
Geography, population, income, institutions may
affect the results.
Different ways to measure openness, new indicators:
none is exhaustive.
Do open economies converge?
The effects of liberalization on the population’s
welfare
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The openness to international trade in Egypt
The Sixties and the Seventies: Egypt is closed to the world, selfsufficiency, import-substitution policy
The Nineties: deep economic reforms, stabilization of
GDP growth,…
…and international openness, with a general
tariff reduction and a bilateral agreement
with the EU (in force since June 2004)
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The openness to international trade in Egypt
The bilateral agreement Egypt – EU, 2004.
Gradual tariff reduction within 12 years, on the egyptian
side.
Purpose of the research:
To assess whether there is an increase in the commercial
flows toward the EU, as a result of the first tariff
reductions.
Possible effects: on small plants, unemployment, new
factories (example, semi-finished goods)
Comparison with the effects of the agreement with Morocco
and Tunisia, who signed with the EU in 1995.
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The international investments in Egypt
The literature
Different effects coming from financial flows and true
investments (FDI)
FDI support technological progress in the developing
countries
Economic and political stability, property rights, quality of
the workforce … can make a country attractive for
FDI
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The international investments in Egypt
1990s: important economic reforms in Egypt:
Privatizations (also in the financial and banking sector)
Control of inflation (and of the budget deficit)
The Central Bank in charge of the exchange rate and of the
interest rates
A new law for the capital markets (1992)
Accountancy rules (IAS) and supervision
… the country reached the GDP growth target of 7%.
The bilateral agreement Egypt – EU, 2004
also includes investments.
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The international investments in Egypt
Did new FDI flow in the country thanks to the economic reforms?
Did the schooling programme create a minimum threshold of human
capital, such that FDIs affects growth positively?
Methodology and expected results:
Endogenous growth model, to relate FDI and growth. FDI as new kinds
of capital in the production function.
Expected results: positive relation FDI-GDP growth, education not
significant.
FDI attracted by facilitations (tax, administrative) in the so-called
“incentive-based zones.”
Positive effects on individual income and employment.
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The schooling programme in Egypt
The literature:
Education and income – education and growth: a paradox
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The microeconomics: more education leads to higher
private incomes (see Duflo for Indonesia).
The macroeconomics: relation education – GDP not
significant or with the wrong sign.
Three possible reasons(see Pritchett)
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Invididually (but not socially) remunerative jobs
Time mismatching between supply and demand for qualified
workforce.
Low quality of education: the human capital does not grow.
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The schooling programme in Egypt
The Fifties: schooling programme, for a universal
and free education.
The Sixties: strong incentives towards secondary
and tertiary level of education – graduates are
now the bulk of the new entrants in the job
markets.
The reform brought benefits from the social point of
view: are these measurable on the economic
side?
Did a higher level of education affected the country’s
attractiveness for FDI?
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The schooling programme in Egypt
Methodology:
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Endogenous growth model (and eventually
comparison with a TFP model) to assess the effects
of education on growth – and comparison with other
MENA countries who did not run a schooling
programme
(If data are available) to assess the effects on
individual income, using a panel at governorate level
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