The Dynamics of Public Investment in Education and Debt Under Economic, Digital, and Sustainable Transformation in the EU27

This article investigates how structural transformations—growth, development, digitalisation, renewable energy consumption, education, and economic freedom—could influence public investment in education and public debt in the EU27. This objective was achieved by taking into consideration suggestive secondary data for the period 2009–2021 and applying the Structural Equation Model (SEM), dynamic panel data (ARDL), and, for robustness, fixed effects (FE) models. Education shows the ability, in structural terms, to relax the public budget, even if, in the very short term, the mandatory education is associated with additional public investment. Growth may create conditions, in the short term, to diminish the public investment in education and to be favourable for less dependence on financial markets, regardless of the period. In contrast, human development is associated with increased investment in education in the very short and long term and with increased public debt in the short and very short term. Education can adjust investment in the sector, especially in the long term, even if tertiary education depresses public investment in the very short term. However, education, regardless of level, has a significant contribution to the economy and society, which qualifies investment in education as being strategic, and education as a sector which must be protected even in complicated economic periods. Economic freedom, in the very short term, through deregulations, helps the state to become less indebted; in the long term, the accumulation of vulnerabilities and dependencies changes this dynamic. The energy transition, despite an immediate favourable effect, in the short term implies state intervention, including through debt, so that European decarbonisation objectives can be achieved as soon as possible. The results complete the literature, especially as there are significant gaps, and inspire decision-makers in establishing educational policy measures regarding public investment and in resolving tensions among European economic policy objectives. The results are not strictly causal relationships; the situation of each member state may differ due to the heterogeneity in the European space.