Does Higher Education Affect Economic Growth? The Case of Greece

Abstract

The purpose of the study is twofold: first, it presents an extensive review of empirical studies that have examined the relationship between higher education and economic growth. Second, it estimates the effect of higher education on economic growth in Greece over the period 1960–2009. It applies the model introduced by Mankiw, Romer, and Weil (1992) by using the higher enrolment rates as a proxy of human capital. The paper employs cointegration and an error-correction model to test the causal relationship between higher education, physical capital investments and economic growth. The empirical analysis reveals that there is a long-run cointegrating relationship between higher education, physical capital investments and economic growth. The elasticity of economic growth with respect to higher education is 0.52%. The results also suggest that there is evidence of unidirectional long-run and short-run Granger causality running from higher education and physical capital investments to economic growth.