The economics of MOOCs and their interrelationship to competitiveness and cohesiveness: the case of Israel

Higher education contributes to state competitiveness via human capital development that provides future returns to the economy through increases in labour productivity. Additionally, higher education is an infrastructure for future state-level social cohesiveness. Those countries where the education system produces more equitable outcomes are more likely to promote future social cohesiveness. The paper argues that Massive Open Online Courses (MOOCs), as a new factor in the global higher education landscape, change the dynamics of state competitiveness and cohesiveness. The economic discussion addresses MOOCs as a Pareto improvement. As such, it addresses the competitive ability of the state through its production, since the possibility frontier is broader when compared to the pre-MOOCs era. However, this discussion fails to addresses the issue of maintaining state social cohesiveness. This paper develops a theoretical model that addresses these changes, taking into account the short run and long run dynamics, and concludes with policy recommendations for countries aiming to sustain their competitiveness while maintaining social cohesiveness.