Relationship among higher education, economic growth and employment in the leading Latin American emerging economies

This study explored the relationship between higher education and economic development in two Latin American emerging markets, Mexico and Peru. The purpose of the study was to test empirically the relationship between higher education and economic growth in the presence and absence of a third variable: employment. The econometric methodology was based on Akaike's Minimum Final Prediction Error Criterion and The Granger bivariate and trivariate concept of causality. Causality was tested in two periods: 1950--2000 and 1970--2000.;The empirical findings suggested that during the period 1950--2000, Mexico did not show causalities between higher education and economic growth. Nevertheless, Peru showed a strong causality from higher education to economic growth in that period. By contrast, while a weak causality from higher education to economic growth was found in Mexico in the period 1970--2000, Peru did not show causalities between these two variables.;The inclusion of employment as a third variable in the period 1970--2000, caused some changes in the initial results. For instance, Peru did show a spurious causality from higher education to economic growth while Mexico direction of causality did not change. Furthermore, a causal relationship from the system higher education and employment to economic growth was found in both countries. In addition, in the case causality between employment and higher education, a bi-directional causality was found in Mexico, and a unidirectional causality from employment to higher education was found in Peru.;A historical perspective of the higher education and economic development in both countries was also discussed. Using this information the study presented several suggestive reasons that explain the empirical results. These findings lead to the final conclusion that higher education does help to increase economic growth, however; this causal relationship is not always direct and will depend on some key variables such as employment.