Dynamics of Education Expenditure, Health Expenditure and Economic Growth: The Case of Selected SAARC Countries

Abstract

This study examines the dynamics of expenditures on education; expenditures on health and economic growth for case of selected SAARC countries by employing panel data for the time span of 1990 to 2022. The result of unit root test exhibits that except education expenditure, which is stationary at level, all other variables are stationary at the 1st difference. Hausman test proposes that fixed effect model (FEM) is suitable for estimations. FEM with a specific cross-section coefficient is also used in the study. The results of FEM reveal that education expenditure, health expenditure, investment and government positively and significantly influence economic growth of selected SAARC countries. Results of Pedroni, Johansen as well as Kao co-integration tests explored long run connections among expenditures on education, expenditures on health and economic growth in selected SAARC countries. Results of Fully Modified Ordinary Least Square and Dynamic Modified Ordinary Least Square and ARDL methods suggest positive as well as significant effect of expenditures on education, health expenditure and investment on economic growth of selected SAARC countries in long run. The results exhibit positive and significant association of education expenditure and health expenditure while positive but insignificant association of investment with economic growth of selected SAARC nations in short run. Findings of the study indicate that increased investment can have crucial effect in enhancing economic growth in selected SAARC nations. The study suggested that advancing human capital through more spending on health and education is essential for economic growth. Enhancing investment in these two areas of human capital should be the highest priority for policy makers in selected SAARC countries.