Competitiveness of the national economy: the role of efficiency of the higher education system

Abstract

Introduction. Human capital is the backbone of a competitive country. Countries with less financial capital have less money and opportunities to spend on effective higher education, thus provoking an outflow of human capital to countries with a high level of competitiveness, particularly with a higher GDP per capita. The World Bank calculates the Human Capital Index, which is part of the Human Capital Project and has a value from 0 to 1, where the higher the value, the better the indicator. For Ukraine, according to the World Bank, this index reaches a value of 0.6, which corresponds to the level of such European countries as Albania, Bosnia and Herzegovina, Bulgaria, Kosovo, and Moldova. The value for the neighbouring EU member states is 0.7 for Poland, Slovakia, and Romania.

HEIs educate a part of the population, and their educational activities increase human capital. Likewise, research and transfer activities of HEIs generate scientific and technological knowledge that leads to economic growth, including an increase in GDP.

Purpose. The study aims to illustrate the role of the higher education system in influencing macroeconomic indicators of the country’s stability.

Methods. The study is based on open data from the World Bank and the Organization for Economic Co-operation and Development.

Results. The study’s results are to determine the impact of higher education funding on the state’s competitiveness. In particular, after analyzing the GDP of European countries and the main indices that consider educational activities and their results, it becomes obvious that countries with higher real funding of higher education demonstrate higher performance in the rankings of key indices, such as intellectual capital and human development. This provides them with the potential for further economic growth. Investing in higher education directly impacts increasing GDP and per capita income, so countries that invest more in higher education have better prospects for increasing GDP and per capita income.

Prospects. Prospects for further research are to identify areas of higher education financing to determine the effective interest rate in relation to GDP for countries with low GDP. Determining the real amount of funding per higher education student can provide opportunities to attract investment in the country, return intellectual capital, reduce brain drain, develop new technologies, and ensure economic growth.