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Determinants of the Relative Importance of Education in Low-Income and Lower-Middle Income Countries

Author

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  • DAO, Min Quang

    (Eastern Illinois University, Charleston, Illinois, USA)

Abstract

This paper empirically assesses the effect of the determinants of the share of educational expenditures in the GDP in low-income and lower-middle income countries while taking into consideration the issue of potential simultaneity bias by introducing interaction variables. Based on data from the World Bank and using a sample of twenty-five low-income economies in 2014, we find that the share of educational expenditures in the GDP growth is dependent upon both the log of per capita gross national income and its square, the square of the log of the share of public health expenditures in the GDP, and the Polity IV index of democracy/autocracy. Using a sample of thirty-eight lower middle-income countries we find that the ratio of education expenditures to the GDP is dependent upon the square of the log of per capita gross national income, both the Polity IV index of democracy/autocracy and its square, and the log of share of public health expenditures in the GDP. When interaction variables are added to the model, regression results show that the share of educational expenditures in the GDP is influenced by the Polity IV index of democracy/autocracy, the square of the log of per capita gross national income, the log of the share of public health expenditures in the GDP, the interaction term between the Polity IV index of democracy/autocracy and its square, and that between the Polity IV index of democracy/autocracy and the log of the share of public health expenditures in the GDP. Since education is an example of human capital, which has been shown to be a driver of economic growth in developing countries (see, for instance, Dao, 2014), assessing empirically the effect of the determinants of the relative importance of education in the economy will enable developing countries to devise strategies aimed at fostering education, and hence at economic growth. Data for all variables are from the 2016 World Development Indicators and the 2015 Polity Series. We specify and estimate a semi log and quadratic model and observe that some coefficient estimates do not have the expected sign due to possible collinearity among some independent variables. Le determinanti dell’importanza relativa dell’istruzione nei paesi a reddito basso e medio-basso Questo studio valuta empiricamente l’effetto delle determinanti della quota di spesa del PIL in istruzione nei paesi a reddito basso e medio-basso, prendendo in considerazione anche il problema della potenziale tendenza alla simultaneità con l’introduzione di variabili di interazione. Sulla base dei dati della Banca Mondiale e usando un campione di 25 economie a basso reddito per l’anno 2014, si riscontra che la quota della spesa per l’istruzione rispetto al PIL dipende sia dal logaritmo del reddito nazionale lordo pro capite e dal suo quadrato, sia dal quadrato del logaritmo della quota di spesa sanitaria rispetto al PIL, sia dall’indice Polity IV di democrazia/autocrazia. Utilizzando un campione di 38 paesi a reddito medio-basso, si riscontra che il rapporto spesa per l’istruzione/PIL dipende: dal quadrato del logaritmo del reddito nazionale lordo pro capite, dall’indice POLITY IV di democrazia/autocrazia e dal suo quadrato, dal logaritmo della quota della spesa sanitaria rispetto al PIL. Quando al modello si aggiungono altre variabili di interazione, i risultati di regressione mostrano che la quota della spesa per l’istruzione sul PIL è influenzata: dall’indice Polity IV di democrazia/autocrazia, dal quadrato del logaritmo del reddito nazionale lordo pro capite, dal logaritmo della quota di spesa sanitaria rispetto al PIL, dal termine di interazione tra l’indice Polity IV di democrazia/autocrazia e dal suo quadrato, dal rapporto tra l’indice Polity IV e il logaritmo della quota di spesa sanitaria rispetto al PIL. Poiché l’istruzione è un esempio di capitale umano che si è rivelato trainante per la crescita economica nei paesi in via di sviluppo (si veda Dao, 2014), valutare empiricamente l’effetto delle determinanti dell’importanza dell’istruzione nell’economia consentirà ai paesi in via di sviluppo di individuare strategie atte ad incentivare l’istruzione e, di conseguenza, la crescita economica. Le fonti dei dati relativi alle variabili sono prese dal “World Development Indicators 2016” e “Polity Series 2015”. Viene specificato e valutato un modello semi log e quadratico e si osserva che alcune stime di coefficienti non hanno il segno previsto a causa di una possibile collinearità tra le variabili indipendenti.

Suggested Citation

  • DAO, Min Quang, 2017. "Determinants of the Relative Importance of Education in Low-Income and Lower-Middle Income Countries," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 70(2), pages 153-164.
  • Handle: RePEc:ris:ecoint:0798
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    References listed on IDEAS

    as
    1. World Bank, 2016. "World Development Indicators 2016," World Bank Publications - Books, The World Bank Group, number 23969, December.
    2. Minh Quang Dao, 2005. "Educating children in developing countries: an empirical analysis," STUDI ECONOMICI, FrancoAngeli Editore, vol. 2005(85).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Education Expenditure; Per capita Gross National Income; Polity IV index of Democracy/Autocracy; Public Health Expenditures; Low-Income Countries; Lower Middle-Income Countries;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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