Impact of educational expenditure on economic growth

The study investigates dynamics of expenditure on education and economic growth in

selected 14 major Asian countries by using balanced panel data from 1973 to 2012. The results of

Pedroni cointegration state the existence of long-run equilibrium relationships between

expenditure on education and economic growth in all the countries. The FMOLS results revealed

a positive and statistical significant impact of education expenditure on economic development of

all the 14 Asian countries (Bangladesh, China, Hong Kong, India, Japan, Nepal, Pakistan,

Malaysia, The Philippines, Saudi Arabia, Singapore, Sri Lanka, Thailand, and Turkey). Further,

the panel vector error correction (PVECM) presents unidirectional Granger causality running

from economic growth to expenditure on education both in the short- as well as in the long-run.

But, expenditure on education only Granger causes economic growth in long-run in all the

countries. As a group, the FMOLS shows a positive impact of educational expenditure on

economic growth. The study argues that education sector is one of the important ingredients of

economic growth in all 14 Major Asian countries. Education sector should be given priority, and a

handsome share of total expenditure of the governments should be made on education sector by

enhancing various elementary, higher and technical educations in the respective nations to have

the skilled man power for the long-term economic development.

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