Education and economic growth in South Africa: an empirical investigation

Purpose - This paper examines the dynamic causal relationship between education and economic growth in South Africa using annual time-series data from 1986 to 2017. The study attempts to answer one critical question: Does education, which is one of the priority sectors in South Africa, drive economic growth? Design/methodology/approach - The study uses the ARDL bounds testing approach and ECM-based Granger causality model to examine this linkage. The study also uses three proxies to measure the level of education. In addition, the study uses two variables: investment and labour, as intermittent variables between the various proxies of education and economic growth, thereby creating a system of multivariate Granger-causality models. Findings - The study finds that the causal relationship between education and economic growth in South Africa is dependent on the variable used to measure the level of education. In addition, the causality tends to change over time. Overall, the study finds the causal flow from economic growth to education to supersede the causal flow from education to economic growth. Originality/value - Unlike some previous studies, the current study uses three proxies of education in South Africa and two intermittent variables in a multivariate setting. To our knowledge, this may be the first study of its kind to examine in detail the dynamic causal relationship between education and economic growth in South Africa – using the ARDL bounds testing approach and a multivariate Granger causality model.