Empirical Analysis on Public Expenditure for Education and Economic Growth: Evidence from Indonesia

Agung Suwandaru, Thamer Alghamdi and Nurwanto Nurwanto
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Agung Suwandaru: School of Business, Bankstown Campus, Western Sydney University, Milperra, NSW 2214, Australia
Thamer Alghamdi: School of Business, Parramata City Campus, Western Sydney University, Parramata, NSW 2150, Australia
Nurwanto Nurwanto: School of Education, Western Sydney University, Penrith, NSW 2751, Australia

Economies, 2021, vol. 9, issue 4, 1-13

Abstract: The purpose of this paper is to find the relationship between public expenditure in the educational sector and the economic growth in Indonesia since the government decided to spend 20% of the state budget on education. We used time series data from 1988 to 2018 and the Cobb–Douglas production function as an economic theory for measurement. In the methodology, we employed Autoregressive Distributed Lag bound tests to find the relationship between variables. The results show that public expenditure on education has an insignificant relationship in the long- and short-term estimation. However, they both have different directions, which is a positive relationship in long-term and a negative relationship in short-term estimation. Meanwhile, gross fixed capital formation shows a positive relationship, and the labour variable has a negative relationship in the short and long terms. In conclusion, the Indonesian government should manage the education system regarding the relationship between education expenditure and economic growth.

Keywords: public expenditure; education; economic growth (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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