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The relationship between public education expenditure and economic growth: The case of India

  • Sayantan Ghosh Dastidar
  • Sushil Mohan
  • Monojit Chatterji

The paper reviews the theoretical and the empirical case for public investment in education in India. Though the theoretical literature provides a backing for such a policy, the empirical literature fails to find a robust relation between education expenditure and growth. Expenditure on education is a necessary but not a sufficient condition for growth. It seems that the effectiveness of education expenditure depends on the institutional and labour market characteristics of the economy. The effectiveness of education investments also depends on other factors such as trade openness. Due to these aforesaid factors, we argue that the empirical relation between education expenditure and growth for India has been inconsistent.

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Paper provided by Economic Studies, University of Dundee in its series Dundee Discussion Papers in Economics with number 273.

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Length: 14 pages
Date of creation: Dec 2012
Date of revision:
Handle: RePEc:dun:dpaper:273
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  1. George Psacharopoulos & Harry Anthony Patrinos, 2004. "Returns to investment in education: a further update," Education Economics, Taylor & Francis Journals, vol. 12(2), pages 111-134.
  2. Sanat Kaul, 2006. "Higher Education in India: Seizing the Opportunity," Indian Council for Research on International Economic Relations, New Delhi Working Papers 179, Indian Council for Research on International Economic Relations, New Delhi, India.
  3. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 503-530.
  4. 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.
  5. Alan Krueger & Mikael Lindahl, 2000. "Education for Growth: Why and For Whom?," Working Papers 808, Princeton University, Department of Economics, Industrial Relations Section..
  6. Abhijeet, Chandra, 2010. "Does Government Expenditure on Education Promote Economic Growth? An Econometric Analysis," MPRA Paper 25480, University Library of Munich, Germany.
  7. Campos, Nauro F. & Nugent, Jeffrey B., 1998. "Institutions and growth: can human capital be a link?," Revista CEPAL, United Nations Economic Commission for Latin America and the Caribbean (ECLAC), April.
  8. A. M. Nalla Gounden, 1967. "Investment in Education in India," Journal of Human Resources, University of Wisconsin Press, vol. 2(3), pages 347-358.
  9. Christopher A. Pissarides, 2000. "Human Capital and Growth: A Synthesis Report," OECD Development Centre Working Papers 168, OECD Publishing.
  10. Sanat Kaul, 2006. "Higher Education in India - Seizing The Opportunity," Development Economics Working Papers 22169, East Asian Bureau of Economic Research.
  11. 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, 09.
  12. Pissarides, Christopher A, 1997. "Learning by Trading and the Returns to Human Capital in Developing Countries," World Bank Economic Review, World Bank Group, vol. 11(1), pages 17-32, January.
  13. Barry Bosworth & Susan M. Collins & Arvind Virmani, 2006. "Sources of Growth in the Indian Economy," India Policy Forum, Global Economy and Development Program, The Brookings Institution, vol. 3(1), pages 1-69.
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