In the midst of a prolonged crisis, Greece urgently needs new growth drivers for its economy. Moreover, recent international research has identified that the negative impact of globalization on income distribution in advanced economies can be offset through increases in total factor productivity (TFP), which in turn requires, inter alia, investment in education. Leveraging on the booming global trend of students’ mobility and capitalizing on the academic excellence of Greek diaspora, Greece could become a regional education hub. Supported by a powerful reputation (dating back to ancient Greece) for producing educators, Greece could attract from abroad academic professors and university students – boosting its exports of services as well as its medium-term potential growth (through its transformation to a knowledge-intensive economy).
The global environment is favorable, as there has been an impressive increase in students’ global mobility over the past four decades (with the number of young people traveling to another country in pursuit of higher education quintupling, to over 4.5 million students from about 1.8 million in 1995 and 0.8 million in 1975). According to the Institute of International Education, this trend is expected to strengthen in the future, with the number of international students projected to reach 8 million by 2025. Asia has been a key driving force of student mobility, as it currently provides ½ of the international students (compared with 40 per cent in 2000), contributing 60 per cent of the increase during past two decades (with ½ of this increase stemming from China).
Countries have benefited from this trend to different degrees. NBG Research has constructed an “Education Index” to measure the global competitiveness of universities. Our estimates suggest that the key determining factors are: the degree of university independence, the quality of its professors, the level of R&D expenditure and the country’s language. Greece ranks low in the Education Index, mainly due to the limited independence of its universities. Weak competitiveness is reflected in Greece’s low share in the global market (0.7 per cent) – with the majority of foreign students enrolling either through bilateral agreements (e.g. with Cyprus) or are children of immigrants (mainly from Albania).
Based on our estimates, a convergence to international standards could increase inbound students in Greece to about 110,000 from 27,600 in 2015, comprising (I) significant improvements in university independence and (ii) benefits from the large pool of Greek academic diaspora (as 60 per cent of Greek professors are currently employed abroad, compared with an EU average of 11 per cent). In particular, the following steps could be considered:
- Establish a coherent national strategy for higher education in order to foster independence, results-based funding and international collaborations.
- Introduce policies and incentives to attract the academic diaspora.
- Foster the creation of Centers-of-Excellence around Greek universities (while increasing R&D expenditure in higher education).
Combined with the curtailment of the current outflow of Greek students, the aforementioned increase in international students could result in an annual inflow to the Greek economy of about €1.8 bn, mainly due to higher exports and lower imports of education services.
Apart from the direct effect of turning Greece into an education hub, such reforms could transform the Greek growth model by improving its level of human capital. According to our estimates from the “NBG Long-term Education-adjusted Growth Model” (which takes into account both the quality of human capital as well as the distinct effect of academic human capital on growth), such reforms could boost annual GDP growth by 1.1 percentage points in the first decade of the reform (adding, ceteris paribus, more than €20 bn annually to the Greek GDP by the end of the decade) and by 0.4 percentage points in the next three decades. Importantly, the gradual improvement of the country’s business sophistication, in conjunction with the improved education system, would produce synergies, and double the growth generating effects. Also note that these calculations underestimate the total benefit, as this transformation would probably attract investment – thus boosting growth further.
Dr Jessie Voumvaki is a senior economist and the Head of Entrepreneurship and Business Analysis in the Economic Analysis Department of the National Bank of Greece.