The Role of Higher Education Attainment in Economic Development: Evidence from the Republic of Moldova

Abstract

This study examines the relationship between attainment of higher education and economic development in the Republic of Moldova amid demographic decline, population ageing, and labour migration. The main aim of the research is to identify whether an increase in the share of individuals aged 25 years and older possessing higher education contributes positively to GDP at purchasing power parity (PPP). The analysis is based on annual macroeconomic data for Moldova covering the period 2001–2024 obtained from the World Bank’s World Development Indicators database and the International Monetary Fund. The empirical methodology relies on the Cobb–Douglas production framework estimated in logarithmic form, where GDP at PPP in constant 2021 international dollars depends on capital stock, labour input, and the share of the population aged 25 or older with higher education. Ordinary least squares (OLS) and two-stage least squares (2SLS) models are estimated in order to test for possible endogeneity of the educational attainment variable and to compare the consistency of the obtained estimates. The results demonstrate that capital accumulation remains the principal driver of economic growth in Moldova, while the share of the population with higher education has a positive and statistically significant effect on GDP at PPP for 2009-2024. Diagnostic procedures do not reveal significant econometric problems related to heteroskedasticity, autocorrelation, multicollinearity, wrong specification. The findings of weak instruments and Wu-Hausman tests suggest that despite demographic challenges and migration processes, the increasing share of the individuals with higher education contributes positively to Moldova’s economic development. UDC: 378:338.1(478); JEL: F43, C22, C26, I25