Does Government Expenditure on Education Promote Economic Growth? An Econometric Analysis

Abhijeet Chandra

MPRA Paper from University Library of Munich, Germany

Abstract: Education being an important component of human capital has always attracted the interests of economists, researchers and policy makers. Governments across the globe in general and in India in particular are trying to improve the human capital by pumping more investments in education. But the issue that whether improved level of education resulting from more education spending can promote economic growth is still controversial. Some economists and researchers have supported the bi-directional relation between these two variables, while it has also been suggested that it is the economic growth that stimulates governments spend more on education, not the other way. Considering this research issue, the present paper uses linear and non-linear Granger Causality methods to determine the causal relationship between education spending and economic growth in India for the period 1951-2009. The findings of this paper indicate that economic growth affects the level of government spending on education irrespective of any lag effects, but investments in education also tend to influence economic growth after some time-lag. The results are particularly useful in theoretical and empirical research by economists, regulators and policy makers.

Keywords: Education expenditure; Economic growth; Indian economy; Granger Causality; Non-linearity. (search for similar items in EconPapers)
JEL-codes: C22 E62 H52 I21 (search for similar items in EconPapers)
Date: 2010-08
New Economics Papers: this item is included in nep-cwa, nep-edu, nep-fdg and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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