Education Inequality and Economic Growth: Framework for the Evaluation of Pakistan’s Education Policy

This paper attempts to substantiate the Education-Growth relationship with a view to evaluate Pakistan’s Education Policy over the last two decades. With a view to the inadequacy of the generally used measures of education, we first estimate the no enrollment ratios, the average schooling years, the standard deviation of education and educational gini for Pakistan and its four provinces across gender domains as measures of the level and spread of schooling for 1973-1998. Then using these measures we estimate some standard econometric relations to understand the evolution of the distribution of education, its impact on economic growth and the role of government policy therein. The paper confirms the existence of a negative relationship between average schooling years and inequality in educational opportunities, along with a strong support for the existence of the Education Kuznets Curve both as a time series and as a cross sectional phenomenon for Pakistan and its four provinces across gender domains. The paper also corroborates the education-growth hypothesis through panel estimation of a modified Macro-Mincerian function. We find that the commitment of the public sector to education provision has a very strong impact both on educational inequality and on the rate of economic growth. Our estimates establish the failure of Pakistan’s education policy on account of the inefficiency of current education expenditure and shows that if the declining commitment to education does not reverse and the public sector does not take care of its inefficiency, then Pakistan will suffer in terms of reduced economic growth and high educational inequality for future generations. The paper recommends that Pakistan’s education reforms should focus on primary education provision for all rather than on higher education for a limited segment of the population