Is The Complementarity Between Education And Financial Development A Panacea For Poverty Reduction?

Kunofiwa Tsaurai ()
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Kunofiwa Tsaurai: University of South Africa, South Africa

Journal of Developing Areas, 2018, vol. 52, issue 4, 227-248

Abstract: The paper studied the effect of the complementarity between education expenditure and financial development on poverty in selected emerging markets using panel data analysis methods [fixed effects and pooled ordinary least squares (OLS)] with secondary data ranging from 1994 to 2014. Quite a number of separate empirical studies on education expenditure-poverty links and the financial development-poverty nexus have been conclusively done. In other words, the separate and individual positive role of financial development and educational investment in terms of contributing towards poverty reduction is no longer a contestable issue. What had so far not yet been explored according to the author's best knowledge is the impact of the complementarity between education expenditure and financial development on poverty. This follows an argument by Bonal (2007) which observed that certain conditions which includes financial development, among others should be present before education can be able to significantly reduce poverty. The closest empirical studies were done by Evans et al (2002), Guihong (2014) and Mobolaji (2010) on the influence of the interaction between human capital and financial development on economic growth. These three studies noted that economic growth positively and significantly responded to the interaction between human capital and financial development. The current study deviates from the above research work in that it explored the impact of the complementarity between education expenditure and financial development on poverty alleviation in selected emerging markets using conventional panel data analysis frameworks. Fixed effects shows that the interaction between education expenditure and financial development had a significant negative impact on poverty whereas pooled OLS results shows that the complementarity between education expenditure and financial development negatively but non-significantly influenced poverty. In summary, both panel data analysis methods found out that the complementarity between financial development and education expenditure reduced poverty in the selected emerging markets, consistent with literature. The implication of the study is that the emerging markets studied should not only spend more money towards education but also design and implement policies and programmes that are meant to further develop the financial sector in order to alleviate poverty.

Keywords: Education; Financial Development; Poverty; Emerging Markets (search for similar items in EconPapers)
JEL-codes: I21 I22 I3 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:jda:journl:vol.52:year:2018:issue4:pp:227-248

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