Globalization, welfare, and the attitudes toward higher education

In this paper we study how the attitudes toward higher education may affect labor market outcomes in the context of globalization. In particular, we show that different educational attitudes are responsible for differences in the wage differential among countries. Using a matching model with two types of workers and firms, we find that there is a trade-off between the wage differential and the workers’ welfare, namely, that an economy that is less willing to educate itself will display a lower wage differential but will lose in terms of welfare. Moreover, from a policy perspective, we show that the negative effects on welfare due to this disinclination to study can be offset by increased labor market flexibility. All things considered, policy makers ought to keep in mind that both a positive attitude toward higher education and labor market flexibility, can lead to improved overall performance in this increasingly globalized world.