45490 2008 Public Disclosure Authorized ABCDE Annual World Bank Conference on Development Economics Regional Public Disclosure Authorized Higher Education and Development Public Disclosure Authorized Edited by Justin Yifu Lin and Public Disclosure Authorized Boris Pleskovic abcd_i-viii.qxd 8/7/08 8:59 PM Page i Higher Education and Development abcd_i-viii.qxd 8/7/08 8:59 PM Page ii abcd_i-viii.qxd 8/7/08 8:59 PM Page iii Annual World Bank Conference on Development Economics—Regional 2008 Higher Education and Development Edited by Justin Yifu Lin and Boris Pleskovic Washington, D.C. abcd_i-viii.qxd 8/7/08 8:59 PM Page iv © 2008 The International Bank for Reconstruction and Development / The World Bank 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. Internet: www.worldbank.org E-mail: [email protected] All rights reserved 1 2 3 4 5 10 09 08 This volume is the product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judg- ment on the part of The World Bank of the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruc- tion and Development/The World Bank encourages dissemination of its work and will normally grant permission promptly to reproduce portions of the work. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA, Tel: 978-750-8400, Fax: 978-750-4470, www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA, Fax: 202-522-2422, email: [email protected]. ISBN: 978-0-8213-7123-7 eISBN: 978-0-8213-7124-4 DOI: 10.1596/978-0-8213-7123-7 ISSN: 1020-4407 abcd_i-viii.qxd 8/7/08 8:59 PM Page v Contents ABOUT THIS BOOK vii INTRODUCTION 1 Justin Yifu Lin and Boris Pleskovic OPENING ADDRESS 9 Wu Qidi OPENING ADDRESS 13 François Bourguignon KEYNOTE ADDRESS Skilled Labor and the International Economy: Whence It Comes, Whither It Goes 15 L. Alan Winters KEYNOTE ADDRESS Global Returns to Higher Education: Trends, Drivers, and Policy Responses 25 François Bourguignon and F. Halsey Rogers KEYNOTE ADDRESS Higher Education Financing in East Asia: Policy Implications for China 41 Weifang Min Higher Education and Migration: Brain Drain and Sharing Skills in the Region Higher Education and International Migration in Asia: Brain Circulation 59 Mark R. Rosenzweig COMMENTS Frédéric Docquier 85 Patricia Sto Tomas 93 v abcd_i-viii.qxd 8/11/08 1:36 PM Page vi vi | CONTENTS Private-Public Provision of Higher Education Intersectoral Interfaces in Higher Education Development: Private and Public in Sync? 101 Daniel C. Levy COMMENTS Kai-ming Cheng 125 Norman LaRocque 133 Financing Higher Education Financing Higher Education: Lessons from Developed Economies, Options for Developing Economies 143 Nicholas Barr Technological Innovation: Linkages between Universities and Industry Wellsprings of Modern Economic Growth: Higher Education, Innovation, and Local Economic Development 177 Maryann P. Feldman and Ian I. Stewart Higher Education, Innovation, and Economic Development 201 Bengt-Åke Lundvall COMMENTS Fumio Kodama 229 Shahid Yusuf 237 Higher Education and Labor Markets in Asia Higher Education and the Labor Market in India 245 Pawan Agarwal COMMENTS Satryo Soemantri Brodjonegoro 273 Sharifah Hapsah Shahabudin 279 abcd_i-viii.qxd 8/7/08 8:59 PM Page vii About This Book The Annual World Bank Conference on Development Economics is a forum for discussion and debate of important policy issues facing developing countries. The conferences emphasize the contribution that empirical economic research can make to understanding development processes and to formulating sound development policies. Conference papers are written by researchers and academics in and outside the World Bank. The conference series was started in 1989. Conference papers are reviewed by the editors and are also subject to internal and external peer review. Some papers were revised after the conference, to reflect comments made by discus- sants or from the floor, while most discussants’ comments were not revised. As a result, discussants’ comments may refer to elements of the paper that no longer exist in their original form. Participants’ affiliations identified in this volume are as of the time of the conference, January 16–17, 2007. Justin Yifu Lin and Boris Pleskovic edited this volume. As in previous years, the planning and organization of the 2007 conference was a joint effort. Special thanks are due to Alan Gelb for overall guidance. We thank several anonymous reviewers for their comments and Aehyung Kim for her useful suggestions and advice. We also thank the conference coordinator, Leita Jones, whose excellent organizational skills helped ensure a successful conference. Finally for pulling this volume together we thank the editorial staff, especially Stuart Tucker and Mark Ingebretsen from the Office of the Publisher. Book production and dissemination were coordinated by the World Bank Office of the Publisher. vii abcd_i-viii.qxd 8/7/08 8:59 PM Page viii Introduction JUSTIN YIFU LIN AND BORIS PLESKOVIC The Annual Bank Conference on Development Economics (ABCDE) is one of the best-known conferences for the presentation and discussion of new knowledge on de - velopment. It is an opportunity for many of the world’s finest development thinkers to present their ideas. The papers in this volume were presented at the ABCDE that was held on January 16–17, 2007, in Beijing, China. Each year the topics selected for the conference represent either new areas of concern for future research or areas that we believe will benefit from a reexamination. The topic of the 2007 conference was “Higher Education and Development,” which encompassed five themes: higher education and migration, private-public pro- vision of higher education, financing of higher education, technological innovation (linkages between universities and industry), and higher education and labor markets in Asia. Welcome Addresses In her welcome address, Wu Qidi notes that the exchange of ideas at this ABCDE conference are important for promoting the development of higher education in East Asia, especially in China. She then introduces seven aspects of recent progress in China’s higher education. First, China has established the world’s largest higher education system by rapidly increasing the enrollment rate during the last decade. Second, the quality of higher education has been improving steadily due to reforms that have modified teaching methods. Third, educational infrastructure, including libraries and teachers’ quality, has been consistently improved. Fourth, a break- through has been made in reform of the higher education system, including the Justin Yifu Lin is chief economist and senior vice president of the World Bank. Boris Pleskovic is research manager, Development Economics, World Bank. Annual World Bank Conference on Development Economics 2008, Regional © 2008 The International Bank for Reconstruction and Development/The World Bank 1 2 | JUSTIN YIFU LIN AND BORIS PLESKOVIC reform of administrative mechanisms giving provincial governments a major role in managing their higher education institutions and in assisting low-income students with financial aid. Fifth, remarkable progress has been made by supporting projects to build world-class universities and research centers. Sixth, the research capacity in science and technology, as well as in humanities and social sciences, has been strengthened. Finally, the international status of higher education has been promoted by establishing educational cooperation and exchange with 178 countries, regions, and international organizations. Qidi concludes that, although the progress has been remarkable, China still confronts many challenges, including the need to devote more resources for higher education. François Bourguignon states that Regional Bank Conference on Development Economics (RBCDE) is an important event, which has evolved over the years into a major forum for international researchers to focus on development issues in particu- lar regions of the world. He notes that the focus of this conference—higher educa- tion and development—is a topic of great importance for the East Asia region and for middle-income countries in general. Bourguignon observes that, at relatively low levels of national development, the focus of educational policy is mostly on primary education, an emphasis embedded in the Millennium Development Goals. He argues that, as development proceeds, economic growth creates demand for workers with higher education, thus shifting the emphasis from primary to both the secondary and tertiary levels, a process that has been reflected in recent educational developments in China. In this regard, he observes that historically the World Bank made its first loan to China a quarter century ago, and it was intended for higher education. Many other World Bank loans for higher education have followed. Bourguignon notes that, while primary education can be justified easily in terms of the benefits of and costs to society, the issues are much more complex for higher levels of education. Specifically, he lists several issues that require special considera- tion, such as who should pay for education, how it should be provided (public or pri- vate), and how the challenge of the brain drain of highly skilled professionals should be managed.