Does education expenditure have a positive impact on economic growth? : a panel data estimation of five developing countries

Abstract

The quality of human capital is essential for a nation to grow and keep up with the growing pace of development and innovation. Education is being recognized as a key contributing factor to the sustainable growth of a nation. This paper seeks to find if more investment in human capital will fuel the growth of developing countries. Five Asian developing countries have been selected to study the impact of their public education expenditure on economic growth. The cointegration test shows that education expenditure has a long-run equilibrium relationship with growth. Next, the Random Effect Model used for the panel regression suggests that there is a positive and significant relationship between education expenditure and the GDP per capita. The result implies that to achieve a sustainable growth plan, countries should invest more in public education. In this way, they will be able to reduce unemployment, increase the standard of living, and also eradicate poverty.