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Does Government Expenditure on Education Promote Economic Growth? An Econometric Analysis

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  • Abhijeet, Chandra

Abstract

Education being an important component of human capital has always attracted the interests of economists, researchers and policy makers. Governments across the globe in general and in India in particular are trying to improve the human capital by pumping more investments in education. But the issue that whether improved level of education resulting from more education spending can promote economic growth is still controversial. Some economists and researchers have supported the bi-directional relation between these two variables, while it has also been suggested that it is the economic growth that stimulates governments spend more on education, not the other way. Considering this research issue, the present paper uses linear and non-linear Granger Causality methods to determine the causal relationship between education spending and economic growth in India for the period 1951-2009. The findings of this paper indicate that economic growth affects the level of government spending on education irrespective of any lag effects, but investments in education also tend to influence economic growth after some time-lag. The results are particularly useful in theoretical and empirical research by economists, regulators and policy makers.

Suggested Citation

  • Abhijeet, Chandra, 2010. "Does Government Expenditure on Education Promote Economic Growth? An Econometric Analysis," MPRA Paper 25480, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:25480
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    References listed on IDEAS

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    1. William F. Blankenau & Nicole B. Simpson & Marc Tomljanovich, 2007. "Public Education Expenditures, Taxation, and Growth: Linking Data to Theory," American Economic Review, American Economic Association, vol. 97(2), pages 393-397, May.
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    5. O'Neill, Donal, 1995. "Education and Income Growth: Implications for Cross-Country Inequality," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1289-1301, December.
    6. Niloy Bose & M. Emranul Haque & Denise R. Osborn, 2007. "Public Expenditure And Economic Growth: A Disaggregated Analysis For Developing Countries," Manchester School, University of Manchester, vol. 75(5), pages 533-556, September.
    7. Jiranyakul, Komain, 2007. "The Relation between Government Expenditures and Economic Growth in Thailand," MPRA Paper 46070, University Library of Munich, Germany.
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    Cited by:

    1. Ahmed Raza ul Mustafa & Mohammad Nishat & Asif Ali Abro, 2022. "Social Protection Spending in Context of Structural and Institutional Performance: A Global Empirical Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 163(2), pages 875-899, September.
    2. Janda, Karel & Quarshie, Gregory, 2017. "Modelling Natural Resources, Oil and Economic Growth in Africa," MPRA Paper 76749, University Library of Munich, Germany.
    3. Ageli, Dr Mohammed Moosa, 2013. "Does Education Expenditure Promote Economic Growth in Saudi Arabia? An Econometric Analysis," MPRA Paper 46673, University Library of Munich, Germany.
    4. Perekunah B. Eregha & Roland I. Irughe & Joel Edafe, 2018. "Education and Economic Growth: Empirical Evidence from Nigeria," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 16(1 (Spring), pages 59-77.
    5. Muhammad Baqir Abdullah & Mukaramah Harun & Mohd Razani Mohd Jali, 2017. "Government Funding in Education Industry," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 7(6), pages 769-772, June.
    6. Iana Paliova & Robert McNown & Grant Nülle, 2019. "Multiple Dimensions of Human Development Index and Public Social Spending for Sustainable Development," IMF Working Papers 2019/204, International Monetary Fund.
    7. Janda, Karel & Quarshie, Gregory, 2017. "Natural Resources, Oil and Economic Growth in Sub-Saharan Africa," MPRA Paper 76748, University Library of Munich, Germany.
    8. Sayantan Ghosh Dastidar & Sushil Mohan & Monojit Chatterji, 2012. "The relationship between public education expenditure and economic growth: The case of India," Dundee Discussion Papers in Economics 273, Economic Studies, University of Dundee.
    9. الرسول, أد/ أحمد أبواليزيد & عون, أد/ عون خيرالله & حافظ, إيمان يوسف, 2018. "التعليم الزراعي وتأثيره على نمو القطاع الزراعي في مصر [Agricultural education and its impacts on the agricultural economic growth in Egypt]," MPRA Paper 98511, University Library of Munich, Germany.
    10. Muhammad Baqir Abdullah & Mukaramah Harun & Mohd Razani Mohd Jali, 2017. "Employment Generated by Government Spending on Education," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 7(2), pages 738-742, February.
    11. Imran HUSSAIN & Ramesh CHANDRA DAS, 2023. "Human Capital Formation And Economic Growth Relationships: Panel Data Insights For The Indian States," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(1), pages 57-71, June.
    12. Shazia Kousar & Farhan Ahmed & Muhammad Afzal & Juan E. Trinidad Segovia, 2023. "Is government spending in the education and health sector necessary for human capital development?," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-11, December.
    13. Awel, Ahmed Mohammed, 2013. "The long-run Relationship between Human Capital and Economic Growth in Sweden," MPRA Paper 45183, University Library of Munich, Germany.

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    More about this item

    Keywords

    Education expenditure; Economic growth; Indian economy; Granger Causality; Non-linearity.;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education

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